TIDMMWB TIDMLBE TIDMMBE
RNS Number : 3958J
MWB Group Holdings PLC
30 March 2010
FOR IMMEDIATE RELEASE
30 March 2010
MWB GROUP HOLDINGS Plc
FINAL RESULTS FOR 12 MONTHS TO 31 DECEMBER 2009
HIGHLIGHTS
MWB GROUP HOLDINGS Plc
· Equity attributable to shareholders of 144p per share at December
2009, from 174p per share at December 2008.
· Property values stabilise with current year deficit only GBP2.1m
compared with GBP79.2m in 2008.
· Malmaison and Hotel du Vin trading results steady despite challenging
market conditions. Operating EBITDA at GBP26.6m level with last year.
· Overall record revenues of GBP60.8m at Liberty up 20% on 2008.
· Significant expansion in MWB Business Exchange following acquisition
of 16 former MLS Group Plc centres.
· Overall MWB Group Holdings loss before tax increased to GBP15.4m from
GBP9.9m in 2008 reflecting tougher market conditions and expenditure on the
newly acquired MLS centres.
"I continue to believe we have the strength and depth of management as well as
excellent products and services within our operating companies, that make us
better placed than most to ride out whatever the economy may present us with.
All our businesses have started the current year well but we are adopting a
cautious approach to this year as a whole until the direction of the UK economy
becomes clearer."
Eric Sanderson
Chairman
MALMAISON AND HOTEL DU VIN
· Revenue increased 3% to GBP111m from GBP108m in 2008.
· Strong performance in food and beverage now generating annual revenue
of almost GBP50m.
· Operating EBITDA level with previous year at GBP26.6m.
· Occupancy stable for the year at 79% despite challenging economic
environment.
· Room rates reflected tougher market conditions easing from GBP112 to
GBP99 at Malmaison and GBP120 to GBP111 at Hotel du Vin.
· Full year's contribution by four new hotels opened in 2008 with an
exceptionally good performance by Malmaison Aberdeen.
"We believe our corporate market is set to grow again although the leisure
market could come under pressure in the third quarter as the impact of proposed
Government changes in fiscal policy begin to bite. The lessons from 2009,
together with our strong cash flow management and strategies we have put in
place over the past year, have put us in an excellent position to take full
advantage of market improvements as they occur."
Robert B. Cook
Chief Executive
Malmaison and Hotel du Vin Group
MWB BUSINESS EXCHANGE
· Revenue down 5% to GBP112.4m over the previous 12 month period.
· Significant expansion in capacity by acquisition during Spring 2009 of
16 former MLS Group PLC centres, predominantly in London.
· Excluding start-up losses of GBP2.6m from the MLS centres, overall
EBITDA reduced by 31% to GBP12.4m compared to the year to 31 December 2008.
· Revenue Per Available Workstation (REVPAW) reduced 29% to GBP6,180 at
31 December 2009 from GBP8,700 at 31 December 2008.
· Revenue Per Occupied Workstation (REVPOW) down 22% to GBP7,545 at 31
December 2009 compared to GBP9,650 at 31 December 2008.
· Despite challenging market conditions occupancy of 82% at 31 December
2009 compared with 90% at the previous year end.
· Three additional new centres in London and one in Harrogate opened in
the year to 31 December 2009. Two further London centres to open in Spring
2010.
· Special 15p per MWB Business Exchange share interim dividend paid in
June 2009. (Total 2008 dividend per MWB Business Exchange share 1.93p).
"Already we are seeing the market for serviced offices and meeting rooms improve
and demand strengthen. Early indications are that occupancy is increasing and
rates are stabilising, particularly in London. Our strategy of maintaining the
leading position in Central London will enable us to take full advantage of the
improving market conditions forecast by the capital's leading property
consultants."
John Spencer
Chief Executive
MWB Business Exchange Plc
LIBERTY PLC
· Overall 20% sales uplift to GBP60.8m against GBP50.9m last year.
· Flagship store sales 18% higher at GBP37.3m against GBP31.5m a year
earlier.
· Since the February 2009 "Renaissance of Liberty" launch, flagship
store trading and margins have achieved overall positive EBITDA for the first
time in the last ten years.
· Liberty accepted as showcase for established international and home
grown design talent including Grayson Perry, Alexander McQueen, Ronnie Wood and
Stella McCartney.
· March 2010 - contracts exchanged for the sale and leaseback of the
iconic flagship store for GBP41.5m.
"Liberty has demonstrated its ability to buck economic and retail trends by
returning to profitability during one of the worst downturns in recent retail
history. It has created an environment that is increasingly appealing to an ever
widening customer base while at the same time enhancing the brand and the values
that it represents."
Geoffroy de La Bourdonnaye
Chief Executive
Liberty Plc
CHAIRMAN'S STATEMENT
This has been a challenging year for the Group but, as the accompanying results
indicate, the management teams in each of our companies have faced up to the
challenges presented by the economic climate and have performed well. We
believe that each of our companies have outperformed their peer group which
demonstrates the quality of our people as well as their products and services.
There is little doubt that all three sectors in which we operate - retail,
hotels, and serviced offices - have come under severe pressure as both companies
and consumers have cut expenditure. However, against the backdrop of such a
difficult business environment we have delivered a good performance.
Liberty, our iconic British brand, has enjoyed a renaissance over the past year
with a 20% revenue increase to almost GBP61m and positive EBITDA of GBP0.1m, its
first for more than a decade. Revenues at the flagship store rose 18% and by 23%
in its fabrics division. All this has been achieved within a retail sector that,
in many areas, has suffered badly as consumers cut back heavily on spending.
On 15 March 2010 we announced that contracts had been exchanged for the sale and
leaseback of the freehold of Liberty's landmark flagship store in Great
Marlborough Street, London W1, subject to approval by Shareholders in General
Meeting. The price agreed was GBP41.5m, some GBP11m more than the valuation of
the building at 31 December 2009. This is clearly highly beneficial. The
proceeds from the sale will be used to repay all bank borrowings in Liberty and
intergroup debt provided by MWB to Liberty, with the remainder providing working
capital. Thereafter, Liberty is leasing the Tudor Building on a 30 year
institutional lease at an annual rent of GBP2.1m with fixed increases every five
years.
We also announced on 12 March 2010 that we had received approaches that could
lead to an offer being made for Liberty, the company. Discussions resulting
from these approaches are continuing and we will report to shareholders when we
have further news.
At our boutique hotel business, Malmaison and Hotel du Vin, occupancy was
maintained at around 79%, slightly down on the previous year. Despite pressure
on rate, total revenue was up from GBP108m in the previous year to GBP111m this
year, aided by full year contributions from the four hotels that opened in the
second half of 2008 and EBITDA remained level with last year at GBP26.6m. Our
hotels' performance was further boosted, against all odds, by food and beverage
revenue which is now running at almost GBP50m annually, equivalent to a healthy
restaurant group in its own right.
MWB Business Exchange outperformed both its peers and market expectations with
the "Business Exchange" section of the business generating EBITDA of GBP12.2m
and pre-tax profits of GBP7.1m, down from GBP13.9m in the previous year. This
is an extremely creditable performance within the context of a difficult
commercial property tenant market where demand for space over the period has
fallen substantially. Business Exchange made a quantum leap over the period when
it took over 16 centres from a distressed competitor and became London's market
leader in the provision of serviced offices, with a total of 45 centres in the
capital at the date of this statement.
While very little capital outlay needed to be incurred in the acquisition of
these centres, as expected, many required investment to bring them up to
Business Exchange's exacting standards. This has had a short term impact on the
enlarged Business Exchange's EBITDA as the new centres become fully integrated
and occupancy levels come up to the company's targets. As a result, EBITDA for
the whole of Business Exchange for 2009 was GBP9.8m against GBP18.1m for 2008.
However, Business Exchange paid a special interim dividend totalling some
GBP9.8m, of which GBP7m was received by the Group.
At Group level, EBITDA for the 12 months to 31 December 2009 was GBP28.8m,
slightly down on the previous year's GBP31.1m, reflecting market conditions.
Pre-tax losses for the period widened to GBP15.4m from GBP9.9m last year and
losses per share amounted to 22.0p compared to 3.6p in 2008.
MWB has benefited from last Autumn's revival in the property investment market
and our total property assets, including plant and equipment stabilised at
GBP559.5m, with GBP8.2m of the first half decline in values being reversed in
the second half, resulting in an overall decline of just GBP2.1m for the full
year. After reflecting the retained loss from earnings and the fall in property
values, equity attributable to MWB Group shareholders fell from GBP125.9m to
GBP104.5m, which translated into 144p per share compared to 174p per share last
year.
Towards the end of 2009 we announced a GBP27.5m equity raising through the
placing of 91.7m new Units in MWB Group. At the same time we also announced that
we had cut costs within the Group and are continuing to do so during the current
year. GBP7.5m of the new equity was used to redeem the same amount of our
Unsecured Loan Stock and the remainder, amounting to GBP17.1m net of fees, has
been used to reduce borrowings and provide working capital. This puts us in a
much stronger position going forward.
As part of this cost-cutting exercise Andrew Blurton, our Joint Finance
Director, resigned from the Board with effect from 12 January 2010, although he
continues to be involved in the Group, on a consultancy basis until the end of
June 2010 to ensure an orderly handover. The Board would like to record its
appreciation of Andrew's contribution to the development of the Group since its
inception and wish him every success in the future.
Across the Group we are facing another difficult year in the UK economy.
Although there are signs and indications that the worst of the recession is
behind us, we believe there is still uncertainty in the future. With an imminent
General Election, difficulties being experienced by members of the Eurozone, and
possible changes to domestic fiscal policies, it is not sensible to predict too
far into the future.
However, I continue to believe we have the strength and depth of management as
well as excellent products and services within our operating companies, that
make us better placed than most to ride out whatever the economy may present us
with. All our businesses have started the current year well but we are adopting
a cautious approach to this year as a whole until the direction of the UK
economy becomes clearer.
Eric Sanderson
Chairman
30 March 2010
MALMAISON AND HOTEL DU VIN OPERATING REVIEW
It has been another challenging year for our boutique hotel business, as we have
had to adapt to changing market conditions and the continuing adverse economic
environment putting rates under pressure. In spite of this, occupancy remained
stable throughout 2009 at around 79%.
At the half-year we reported that, not unexpectedly, there had been a decline in
our corporate customer base and an increase in leisure business, particularly at
Malmaison. This shift in our customer base continued throughout the second half
of the year. Whilst occupancy remained consistent over the course of the year,
we saw a 10% decline in average room rates across the group to GBP104 against
GBP115. Malmaison, which is more reliant on the corporate market, bore the brunt
of this rate drop with a 12% fall from GBP112 to GBP99, while Hotel du Vin
("HdV"), which is more leisure orientated, saw rates ease by a more modest 8% to
GBP111 against GBP120 previously.
What has been incredibly encouraging and extremely positive has been the rise in
customer spend on food and beverage ("F&B"). HdV saw a 13% increase in its
restaurant business revenues over the year to more than GBP28m and F&B income
now accounts for approximately 55% of total HdV business. Malmaison experienced
a 10% uplift in its restaurant revenue to GBP20.7m which represented 34% of
total revenue. Increasingly the group is maximising its position as a great
restaurant business with rooms, as food and beverage is now generating annual
revenue of almost GBP50m.
Total revenue across the group for the 12 months to 31 December 2009 was
marginally up on the previous year at GBP111.0m against GBP107.6m. Malmaison
accounted for GBP60.3m of the total, slightly down on the past year's GBP62.3m,
while HdV produced a near 12% uplift at GBP50.8m compared to GBP45.3m last time.
HdV benefited from a full year's contribution from three new hotels that opened
in the second half of 2008: Poole, Newcastle and Edinburgh.
At Malmaison there was only one new hotel making a first full year contribution:
Aberdeen, which opened in November 2008 and took off almost immediately,
reaching 79% occupancy for the 12 months to 31 December 2009. Aberdeen has been
an incredible success, outstripping its budget by some margin; it generated a
24% increase over budgeted revenue for the year and exceeded its food and
beverage budget by some 70%.
Group EBITDA was level with last year at GBP26.6m. Malmaison contributed EBITDA
of GBP15.4m, down from GBP16.5m, while HdV produced GBP11.2m against GBP9.9m, an
increase of 13%. On a like-for-like basis HdV's revenue was slightly down at
GBP41.7m compared to GBP42.5m but EBITDA was unchanged at GBP10.5m.
There was regional variation in performance, especially at Malmaison. Leeds,
Manchester and Liverpool came under strong room rate pressure although
restaurant revenues overall were good, especially at Manchester. Scotland
performed better than the other regions, underpinned by the very strong
contribution from Aberdeen. London, which had a slow first six months, produced
a strong second half performance.
Leisure and social spending were the highlights at HdV. Our hotels at Brighton,
Cambridge, Cheltenham, Devonshire Gardens and Harrogate particularly benefited
from weddings and events revenue. Devonshire Gardens, for example, was the
chosen venue for 84 weddings over the course of the year and advance bookings
for the current year are even stronger. The extension at Brighton, comprising 12
extra rooms, completed during the year and also did well.
Conversely our new HdVs at Poole, Edinburgh and Newcastle endured fairly tough
trading conditions and they are taking longer to establish themselves in their
respective markets than originally envisaged. However, I can report that they
are all now trading more strongly and are getting nearer to the revenue levels
we originally anticipated.
Our approach to the more challenging market place has been to communicate a
clear "value for money" message to existing and potential new customers. To help
deliver this message, particularly during the first six months of 2009, we
offered a group wide promotion of two courses and a bottle of wine for GBP29. In
only the second month of the promotion we estimated this drove an extra 22,000
covers in all our restaurants. Interestingly, take-up of this promotion has
slowed as customers traded up to the full à la carte menu.
The group continues to collect industry awards including the Business Traveller
award for "Best Smaller Hotel Chain" in 2009 while the Aberdeen Malmaison won
the "Best Architecture - Conversion of an Existing Building" award at the
European Hotel Design Awards 2009.
We have decided to sell two of our properties: the Edinburgh Malmaison and the
St Andrews hotel which was to be converted into an HdV. The Edinburgh property
is our oldest Malmaison and we believe it is better to realise value from this
investment and relocate our Edinburgh presence into a city centre property. At
St Andrews, whilst the unbranded hotel operates successfully, we believe the
cost of converting the hotel into an HdV outweighs the medium term resultant
investment value of the property. We will update shareholders as these sales
progress.
In the current climate our focus has been on controlling costs without impacting
on our award winning service. In a business like ours, the big areas of
expenditure are food and labour costs which we have kept under very strict
control including finding new lower cost suppliers or re-negotiating existing
contracts without sacrificing quality.
Capital expenditure has been deliberately reduced over the course of 2009.
However, we have invested in new management software that enables us to monitor
the room pricing of comparable hotel groups in a transparent way and allows us
to adjust our room rates accordingly.
2010 has started with mixed fortunes. The widespread snow and ice at the start
of January had an impact across the group although I am pleased to report that
there has been a strong recovery and I am confident we will meet our first
quarter's budget. February is already looking very positive with Malmaison
recovering very quickly from the early setbacks.
This year's restaurant promotions, "The Three Tenners" at Malmaison and "Du Vin
or not Du Vin" at HdV, are already proving to be highly successful with revenue
ahead of last January, despite the adverse weather.
We anticipate the first part of the year, in the run-up to the General Election,
to deliver results comparable to last year but post-election the future is less
certain. We believe our corporate market is set to grow again although the
leisure market could come under pressure in the third quarter as the impact of
proposed Government changes in fiscal policy begin to bite.
This degree of uncertainty leads us to be cautious about the future. However,
the lessons from 2009, together with our strong cash flow management and
strategies we have put in place over the past year, have put us in an excellent
position to take full advantage of market improvements as they occur.
Robert B. Cook
Chief Executive
Malmaison and Hotel du Vin Group
30 March 2010
MALMAISON AND HOTEL DU VIN - KEY FINANCIAL HIGHLIGHTS
The key performance indicators for the business, together with its trading and
balance sheet performance for the years ended 31 December 2009 and 2008, are
summarised below:-
+-------------------------------------+----------+------------+-----------+
| | | Year | Year |
| | | ended | ended |
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+------------+-----------+
| Malmaison | | | |
+-------------------------------------+----------+------------+-----------+
| | | | |
+-------------------------------------+----------+------------+-----------+
| Total revenue | GBP'000 | 60,271 | 62,322 |
+-------------------------------------+----------+------------+-----------+
| Average occupancy for year | % | 78 | 79 |
+-------------------------------------+----------+------------+-----------+
| Average room rate for year | GBP | 99 | 112 |
+-------------------------------------+----------+------------+-----------+
| Operating EBITDA* | GBP'000 | 15,366 | 16,526 |
+-------------------------------------+----------+------------+-----------+
| Number of operating hotels at year | | 12 | 12 |
| end | | | |
+-------------------------------------+----------+------------+-----------+
| | | | |
+-------------------------------------+----------+------------+-----------+
| Hotel du Vin | | | |
+-------------------------------------+----------+------------+-----------+
| | | | |
+-------------------------------------+----------+------------+-----------+
| Total revenue | GBP'000 | 50,763 | 45,314 |
+-------------------------------------+----------+------------+-----------+
| Average occupancy for year | % | 81 | 81 |
+-------------------------------------+----------+------------+-----------+
| Average room rate for year | GBP | 111 | 120 |
+-------------------------------------+----------+------------+-----------+
| Operating EBITDA* | GBP'000 | 11,221 | 9,927 |
+-------------------------------------+----------+------------+-----------+
| Number of operating hotels at year | | 14 | 14 |
| end | | | |
+-------------------------------------+----------+------------+-----------+
| | | | |
+-------------------------------------+----------+------------+-----------+
| Combined Malmaison and Hotel du Vin | | | |
+-------------------------------------+----------+------------+-----------+
| Total revenue | GBP'000 | 111,034 | 107,636 |
+-------------------------------------+----------+------------+-----------+
| Operating EBITDA* | GBP'000 | 26,587 | 26,453 |
+-------------------------------------+----------+------------+-----------+
*Operating EBITDA excludes pre-opening costs and profit on disposal of fixed
assets.
+-------------------------------------+----------+-----------+-----------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+-----------+-----------+
| Balance sheet composition | | | |
+-------------------------------------+----------+-----------+-----------+
| Property, plant and equipment | GBP'000 | 483,085 | 493,311 |
+-------------------------------------+----------+-----------+-----------+
| Debt | GBP'000 | (278,357) | (282,322) |
+-------------------------------------+----------+-----------+-----------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+-----------+-----------+
| MWB Group in Malmaison and Hotel | GBP'000 | 140,331 | 147,703 |
| du Vin | | | |
+-------------------------------------+----------+-----------+-----------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+-----------+-----------+
| MWB Group in Malmaison and Hotel | | | |
| du Vin, | | | |
+-------------------------------------+----------+-----------+-----------+
| in pence per MWB Group share | Pence | | |
| | | 194p | 204p |
+-------------------------------------+----------+-----------+-----------+
MWB BUSINESS EXCHANGE PLC OPERATING REVIEW
Business Exchange experienced a successful 2009 by adhering to its well proven
strategy of focusing on the London market. Expansion in this market has been our
stated goal for some time as we have always believed that concentrating our
centres in such a dynamic business environment will generate the most profitable
returns.
The highlight of the year was our acquisition of 16 carefully selected centres
from MLS, a rival of Business Exchange, which was going into administration.
These centres are predominantly located in London. Since the year end we have
secured two new Central London centres in Knightsbridge and Paddington. Both
centres will open in the first half of 2010 and are in prime locations where
there is very little competition.
As a result, Business Exchange has an increasingly dominant footprint in the
capital with 47 centres. Today Business Exchange is London's largest provider of
serviced offices with almost 14,000 workstations covering nearly 1.2m sq ft.
These centres now account for 64% of our total portfolio of 73 centres across
1.8m sq ft, providing approximately 20,000 workstations.
As is well documented, the market demand for offices in the UK has been
extremely weak and, as a consequence, total revenue for the year to 31 December
2009 dropped 5% to GBP112.4m compared to GBP118.5m in 2008. This reflected a 9%
fall in occupancy to 82% and an 18% decline in rate in our mature centres,
offset by the acquisition of the MLS centres. The resulting EBITDA was GBP9.8m
against GBP18.1m while pre-tax profits declined to GBP4.2m from GBP14.0m the
previous year. In June 2009 we paid a special interim dividend totalling
GBP9.8m. Even after this, our operations continue to be underpinned by GBP18.1m
of net assets, with no debt.
As a result REVPOW (annualised revenue per occupied workstations) in our mature
centres eased some 14% from GBP9,650 to GBP8,265 and REVPAW (annualised revenue
per available workstation) was down 20% to GBP6,955 from GBP8,700. There was
also an 18% decline in revenue from our meeting and conference room division
which dropped to GBP9.2m from GBP11.3m.
Business Exchange, London's largest provider of serviced offices, offers a
powerful mix of product, price and location underpinned by robust internal cost
controls that ensure the company has reasonable resilience against the current
market conditions. It should be noted that the contracted nature of Business
Exchange's revenue creates a lag of up to 18 months between what occurs in the
market and the financial performance reflected in our results. In other words
our numbers reflect price reductions that occurred in 2008 and 2009.
In 2009 we continued to see a demand shift in the market towards small and
medium sized enterprises (SMEs) as corporates and larger clients reined back
their expenditure in both serviced offices and meeting rooms. We, therefore, saw
larger higher paying clients move out which were replaced by smaller clients and
start-up businesses in a more competitive environment.
Encouragingly, our renewal rates were maintained at 70% and as the year
progressed our existing clients accepted rate increases for their workstations
on renewal. Equally, new workstation prices stabilised. This was in stark
contrast to the end of 2008 and the first half of 2009 when incoming licencees
were paying considerably less than those they replaced. The benefit to Business
Exchange, therefore, of licence fees hardening will not be seen until the second
half of 2011 and thereafter.
Our focus on the SME and business start-up market enables us to spread our risk.
Although there is an initial short term revenue fall when a large client moves
out there is greater long term benefit from the Group's improved resilience due
to a wider and more diverse client base. At the same time, our provision of high
level service and employee engagement, together with the quality of our centres,
continue to attract, and, increasingly retain clients. Typically the average
number of workstations licensed to a client at 31 December 2009 was six and the
average length of stay 25 months (compared to eight and 23 months respectively a
year ago).
We continue to ensure the business reflects a broad and dynamic customer base
and is not dependent on any one specific sector. Just as importantly, we are
constantly reviewing and improving our infrastructure. To that end, the roll out
of our new IT and Telephony platform will create new revenue-generating
opportunities through a broader product and service offering, as well as meeting
the ever evolving demands of our wide client base.
The current year is one of consolidation with the focus on improving the
performance of the new and existing centres by driving occupancy and revenue.
Already we are seeing the market for serviced offices and meeting rooms improve
and demand strengthen. Early indications are that occupancy is increasing and
rates are stabilising, particularly in London. Our strategy of maintaining the
leading position in Central London will enable us to take full advantage of the
improving market conditions forecast by the capital's leading property
consultants. London's position as a major global financial centre will be
reinforced as confidence returns to the financial markets and we move towards
the 2012 Olympics.
John Spencer
Chief Executive
MWB Business Exchange Plc
30 March 2010
MWB BUSINESS EXCHANGE PLC - KEY FINANCIAL HIGHLIGHTS
The key performance indicators for this business and the trading performance and
balance sheets for the years ended 31 December 2009 and 2008, are summarised
below:-
+-------------------------------------+----------+--------------+------------+
| | | Year | Year |
| | | ended | ended |
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+--------------+------------+
| Operating statistics | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| Revenue | GBP'000 | 112,416 | 118,544 |
+-------------------------------------+----------+--------------+------------+
| Occupancy at year end* | % | 82 | 90 |
+-------------------------------------+----------+--------------+------------+
| Annualised revenue per available | | | |
| workstation | | | |
+-------------------------------------+----------+--------------+------------+
| ("REVPAW") at year end* | GBP | 6,180 | 8,700 |
+-------------------------------------+----------+--------------+------------+
| Annualised revenue per occupied | | | |
| workstation | | | |
+-------------------------------------+----------+--------------+------------+
| ("REVPOW") at year end* | GBP | 7,545 | 9,650 |
+-------------------------------------+----------+--------------+------------+
| EBITDA | GBP'000 | 9,806 | 18,088 |
+-------------------------------------+----------+--------------+------------+
| Leased centres at year end | Number | 50 | 38 |
+-------------------------------------+----------+--------------+------------+
| Number of Operating and Management | Number | 8 | 4 |
| Agreement | | | |
+-------------------------------------+----------+--------------+------------+
| centres at year end | | | |
+-------------------------------------+----------+--------------+------------+
| Management contract centres at year | Number | 15 | 13 |
| end | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| *Leased centres only | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| Financial performance | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| Profit before tax | GBP'000 | 4,209 | 14,003 |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+--------------+------------+
| Balance sheet composition | | | |
+-------------------------------------+----------+--------------+------------+
| | | | |
+-------------------------------------+----------+--------------+------------+
| Property, plant and equipment | GBP'000 | 44,464 | 41,535 |
+-------------------------------------+----------+--------------+------------+
| Net cash | GBP'000 | 6,241 | 16,404 |
+-------------------------------------+----------+--------------+------------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+--------------+------------+
| MWB Group in MWB Business | GBP'000 | 11,234 | 24,339 |
| Exchange Plc | | | |
+-------------------------------------+----------+--------------+------------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+--------------+------------+
| MWB Group in MWB Business | | | |
| Exchange Plc, | | | |
+-------------------------------------+----------+--------------+------------+
| in pence per MWB Group share | Pence | 15p | 34p |
+-------------------------------------+----------+--------------+------------+
LIBERTY PLC OPERATING REVIEW
This has been an historic year for our iconic brand. For the first time in a
decade Liberty has produced positive EBITDA against a background of possibly one
of the most difficult economic environments the retail sector has experienced
since the early 1990's.
As shareholders know, much of this success has been driven by the highly
acclaimed Renaissance of Liberty which was launched in February 2009. Looking
back at the launch, which was opened by Slumdog Millionaire actress Freida
Pinto, it is clear that the Renaissance was a watershed for both the flagship
store and the brand itself.
In many ways the Renaissance re-captured the original spirit of Liberty:
quirkiness and cutting edge design, all set in a redesigned store. This not only
brought back many of our former customers but attracted many thousands of new
ones who began to explore the store and brand for the first time.
Very quickly Liberty became the watchword for new and exciting fashion with many
brands being introduced by the store to London for the first time. As well as
showcasing established international designers, during 2009 we did much to
promote young British designers both the little known and the well known. These
included Michael Birch, Lost Property, Alexander McQueen, Stella McCartney,
Nudie, Grayson Perry, Barbour and Ronnie Wood.
Once more, Liberty was offering an exciting, eclectic but accessible fashion
unavailable elsewhere in London, right across the fashion palette - from scarves
to jewellery, from dresses to perfume, and bags to sunglasses. Liberty was even
home to Hermès' first ever pop-up shop which was a tremendous success.
The result was an overall 20% uplift in Liberty's like-for-like revenues for
2009 to almost GBP61m against GBP51m during the previous year. Sales at the
flagship store also rose strongly with total revenue for 2009 18% higher at
GBP37.3m against GBP31.5m a year earlier.
What has been particularly pleasing is that we have maintained the momentum
established at the time of the Renaissance launch not only through the 2009
Spring/Summer season but also through Autumn/Winter and into the first quarter
of 2010.
2009 also saw the introduction of the Liberty Style Service which has attracted
a new group of VIPs to the store. The Style Service offers one-to-one styling
advice to individual customers that helps them to select not only the most
appropriate range of garments but also the most suitable accessories that
complement those choices. It enables the serious customer to access the entire
Liberty range in one room and allows them to experiment in a discreet
environment as well as enhancing their shopping experience.
While it is often fashion and designers that capture the headlines as well as
customers' hearts, Liberty has made great progress in other areas too. Our
well-established fabrics business has had another record year as demand for new
designs as well as the back catalogue continues unabated.
Not only have collaborations with designers such as Grayson Perry delivered
great results but our fabrics have been used in some unlikely settings, such as
recycled coffee bags. This eco-bag from Lost Property took the humble coffee
bean bag, lined it with a Liberty print and created another fashion must-have
that flew out of the door at GBP50 a time. We also re-introduced a collection of
souvenir items such as mugs and handkerchiefs, all with Liberty prints. These
instant gifts, which we brought to the store during Summer 2009, have been
extremely successful and we continue to sell them today.
Additionally we have created new, and even more vibrant, prints in a range of
different fabrics that have included silk and wool for the first time. This
division has been supported by an expanded commercial team.
The end result has been another extremely strong contribution from our fabrics
division that saw revenue rise a further 23% to GBP21.5m compared to GBP17.4m in
2008, which in itself was a record performance. The Japanese element of our
Fabrics division benefited from a strong Yen in comparison to the Pound as it
produced a 43% increase in revenue in our Sterling financial statements.
It is also pleasing to see our Internet division making solid progress over the
year. Clearly the division is benefiting from the increased exposure the Liberty
brand is receiving, both at home and internationally. As we expanded our on-line
store it attracted a growing customer base, which was particularly evident in
the run-up to Christmas as sales of seasonal gifts grew rapidly. We believe this
division has a great future and will be a major component in the business as we
go forward.
As shareholders know we took the strategic decision to close our Knightsbridge
stand-alone Liberty of London store in the Summer of 2009. The decision was
principally taken as we had received an extremely attractive offer for our lease
on the shop in Sloane Street. In turn this gave us the opportunity to
re-structure the division by re-modelling the brand and product offer across the
Liberty range, as well as exploring other opportunities to develop Liberty of
London both at home and internationally.
There is no doubt in our mind that 2009 has been a year of great progress for
the business with all divisions reporting sustainable growth, at a time when
there is great uncertainty in the economy and the political climate. All our
operating divisions delivered EBITDA growth and it is satisfying to be able to
report that our Internet business, which was only launched in July 2008 is
already breaking even at the EBITDA level.
Liberty has demonstrated its ability to buck economic and retail trends by
returning to profitability during one of the worst downturns in recent retail
history. It has created an environment that is increasingly appealing to an ever
widening customer base while at the same time enhancing the brand and the values
that it represents. Once more Liberty has become an exciting, eclectic but
accessible place to shop and therefore we view the future with confidence.
Geoffroy de La Bourdonnaye
Chief Executive
Liberty Plc
30 March 2010
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:-
+-------------------------------------+----------+----------+----------+
| | | Year | Year |
| | | ended | ended |
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+----------+----------+
| Financial performance | | | |
+-------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------+----------+----------+----------+
| Total revenue | GBP'000 | 60,774 | 50,850 |
+-------------------------------------+----------+----------+----------+
| Operating EBITDA before brand | | | |
| expenditure and | | | |
+-------------------------------------+----------+----------+----------+
| reorganization costs | GBP'000 | 3,004 | 1,815 |
+-------------------------------------+----------+----------+----------+
| Operating profit/(loss) before | | | |
| brand expenditure | | | |
+-------------------------------------+----------+----------+----------+
| and reorganisation costs | GBP'000 | 1,025 | (435) |
+-------------------------------------+----------+----------+----------+
| Brand expenditure | GBP'000 | (2,761) | (4,344) |
+-------------------------------------+----------+----------+----------+
| Reorganisation costs | GBP'000 | (135) | (1,346) |
+-------------------------------------+----------+----------+----------+
| Loss before taxation | GBP'000 | (3,392) | (6,651) |
+-------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------+----------+----------+----------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-------------------------------------+----------+----------+----------+
| Balance sheet composition | | | |
+-------------------------------------+----------+----------+----------+
| | | | |
+-------------------------------------+----------+----------+----------+
| Intangible asset - brand | GBP'000 | 18,200 | 18,200 |
+-------------------------------------+----------+----------+----------+
| Property, plant and equipment | GBP'000 | 31,858 | 31,006 |
+-------------------------------------+----------+----------+----------+
| Net debt | GBP'000 | (10,601) | (12,390) |
+-------------------------------------+----------+----------+----------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+----------+----------+
| MWB Group in Liberty Plc | GBP'000 | 28,795 | 27,004 |
+-------------------------------------+----------+----------+----------+
| Equity attributable to shareholders | | | |
| of | | | |
+-------------------------------------+----------+----------+----------+
| MWB Group in Liberty Plc, in | | | |
| pence per | | | |
+-------------------------------------+----------+----------+----------+
| MWB Group share | Pence | 40p | 37p |
+-------------------------------------+----------+----------+----------+
FINANCIAL REVIEW
for the year ended 31 December 2009
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 2009, 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, repay the related debt and
return surplus proceeds to Shareholders. This emanates from the Cash
Distribution Programme proposals approved by Shareholders as set out in the May
2002 Circular. Since this date approximately GBP80.4m in cash has been returned
to Shareholders in the form of buy back of shares.
This Cash Distribution Programme was originally targeted to be completed by the
end of December 2005 but has been extended at various times due to prevailing
market conditions. In the current adverse economic environment, the Board
considers that it is not viable to retain a short term target date by which such
realisations will be completed. Accordingly, and as outlined in the Prospectus
issued to Shareholders in December 2009, the Cash Distribution Programme has now
been extended to 31 December 2016.
The policy to realise the Company's assets in cash or cash equivalents by the
disposal of the businesses provides a clear focus. Within the Group, each of
MWB's three businesses has its own business plan which is operated and managed
by the Directors of each separate business.
As a result, each of the operating divisions can go forward and maximise its
performance whilst MWB is well placed to realise cash and cash equivalents which
can be distributed to Shareholders following a sufficient improvement in market
values.
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP HOLDINGS PLC
During the year ended 31 December 2009, there was a net decrease in equity
attributable to shareholders of MWB Group Holdings Plc of GBP21.4m, from
GBP125.9m to GBP104.5m, or 30p per share from 174p to 144p per share.
The movement in equity attributable to shareholders of MWB during the year is
summarised in the following table:-
+----------------------------------------------------+-----------+--------+
| | Year ended |
+----------------------------------------------------+--------------------+
| | 31 December |
| | 2009 |
+----------------------------------------------------+--------------------+
| | | Pence |
+----------------------------------------------------+-----------+--------+
| | GBP'000 | per |
| | | share |
+----------------------------------------------------+-----------+--------+
| Equity attributable to shareholders of MWB Group | | |
| Holdings Plc | | |
+----------------------------------------------------+-----------+--------+
| at 1 January 2009 | 125,881 | 174p |
+----------------------------------------------------+-----------+--------+
| Movements during the year: | | |
+----------------------------------------------------+-----------+--------+
| Revaluation of property, plant and equipment, net | (1,901) | (3p) |
| of tax | | |
+----------------------------------------------------+-----------+--------+
| Retained loss | (15,948) | (22p) |
+----------------------------------------------------+-----------+--------+
| MWB Business Exchange Plc purchase of ordinary | (1,701) | (2p) |
| shares | | |
+----------------------------------------------------+-----------+--------+
| Effective portion of changes in fair value of | (2,713) | (4p) |
| derivative financial hedges | | |
+----------------------------------------------------+-----------+--------+
| Defined benefit pension scheme actuarial losses, | (680) | (1p) |
| net of tax | | |
+----------------------------------------------------+-----------+--------+
| Other movements | 1,598 | 2p |
+----------------------------------------------------+-----------+--------+
| Equity attributable to shareholders of MWB Group | | |
| Holdings Plc | | |
+----------------------------------------------------+-----------+--------+
| at 31 December 2009 | 104,536 | 144p |
+----------------------------------------------------+-----------+--------+
NET ASSET VALUE
The net assets of the Group are financed by equity attributable to shareholders
of MWB Group Holdings Plc and minority interests. The sources of finance of the
Group at 31 December 2009 in the consolidated balance sheet and at the previous
year end were as follows:-
+--------------------------------------------+------------+------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+--------------------------------------------+------------+------------+
| Total equity attributable to shareholders | | |
| of | | |
+--------------------------------------------+------------+------------+
| MWB Group Holdings Plc | 104,536 | 125,881 |
+--------------------------------------------+------------+------------+
| Minority interests | 71,713 | 77,918 |
+--------------------------------------------+------------+------------+
| Net assets at year end | 176,249 | 203,799 |
+--------------------------------------------+------------+------------+
The analysis of net assets in the Consolidated Statement of Financial Position
across the Group's operations at 31 December 2009, and at the previous year end,
is as follows:-
+--------------------------+-----------+------------+-----------+-----------+--------------+
| At 31 December 2009 | Net | (Debt)/ | Net | Less | Total |
| | assets | cash | assets | minority | equity |
| | before | GBP'000 | GBP'000 | interests | attributable |
| | debt | | | GBP'000 | to |
| | and | | | | shareholders |
| | cash | | | | of MWB Group |
| | GBP'000 | | | | Holdings Plc |
| | | | | | GBP'000 |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| Malmaison and Hotel du | 473,153 | (278,357) | 194,796 | (54,465) | 140,331 |
| Vin | | | | | |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| MWB Business Exchange | 11,835 | 6,241 | 18,076 | (6,842) | 11,234 |
| Plc | | | | | |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| Liberty Plc | 48,167 | (10,601) | 37,566 | (8,771) | 28,795 |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| Group debt, less cash | 5,858 | (80,047) | (74,189) | (1,635) | (75,824) |
| and other assets | | | | | |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| | 539,013 | (362,764) | 176,249 | (71,713) | 104,536 |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| Equity attributable to | | | | | |
| shareholders | | | | | |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| of MWB Group Holdings | | | | | |
| Plc in | | | | | |
+--------------------------+-----------+------------+-----------+-----------+--------------+
| pence per share | | | | | 144p |
+--------------------------+-----------+------------+-----------+-----------+--------------+
+--------------------------+-----------+------------+------------+-----------+--------------+
| At 31 December 2008 | Net | (Debt)/ | Net | Less | Total |
| | assets | cash | assets | minority | equity |
| | before | GBP'000 | GBP'000 | interests | attributable |
| | debt | | | GBP'000 | to |
| | and | | | | shareholders |
| | cash | | | | of MWB Group |
| | GBP'000 | | | | Holdings Plc |
| | | | | | GBP'000 |
+--------------------------+-----------+------------+------------+-----------+--------------+
| Malmaison and Hotel du | 484,555 | (282,322) | 202,233 | (54,530) | 147,703 |
| Vin | | | | | |
+--------------------------+-----------+------------+------------+-----------+--------------+
| MWB Business Exchange | 19,249 | 16,404 | 35,653 | (11,314) | 24,339 |
| Plc | | | | | |
+--------------------------+-----------+------------+------------+-----------+--------------+
| Liberty Plc | 49,763 | (12,390) | 37,373 | (10,369) | 27,004 |
+--------------------------+-----------+------------+------------+-----------+--------------+
| Group debt, less cash | | | | | |
| and | | | | | |
+--------------------------+-----------+------------+------------+-----------+--------------+
| other assets | 7,982 | (79,442) | (71,460) | (1,705) | (73,165) |
+--------------------------+-----------+------------+------------+-----------+--------------+
| | 561,549 | (357,750) | 203,799 | (77,918) | 125,881 |
+--------------------------+-----------+------------+------------+-----------+--------------+
| Equity attributable to | | | | | |
| shareholders | | | | | |
+--------------------------+-----------+------------+------------+-----------+--------------+
| of MWB Group Holdings | | | | | |
| Plc in | | | | | |
+--------------------------+-----------+------------+------------+-----------+--------------+
| pence per share | | | | | |
| | | | | | 174p |
+--------------------------+-----------+------------+------------+-----------+--------------+
REVIEW OF PROPERTY, PLANT AND EQUIPMENT
Valuation surplus on property portfolio at 31 December 2009
A valuation of the Group's freehold and long leasehold property interests was
undertaken at 30 June 2009 and at 31 December 2009. The valuation was performed
by DTZ and was performed on the basis of Existing Use Value. The net deficit
over previous book values before minority interests for the year ended 31
December 2009 totalled GBP2.1m, 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 and 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.
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 valuation deficit debited to the revaluation reserve during the six months
ended 30 June 2009 totalled GBP8.4m and arose as follows:-
+------------------+-----------+-----------+------------+-----------+-------------+
| Six months to | Gross | Less | Gross | Less | Debited |
| 30 June 2009 | valuation | previous | deficit | minority | to |
| | | book | | interests | revaluation |
| | | value | | | reserve |
+------------------+-----------+-----------+------------+-----------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------+-----------+-----------+------------+-----------+-------------+
| Malmaison | 275,573 | 275,706 | (133) | 23 | (110) |
+------------------+-----------+-----------+------------+-----------+-------------+
| Hotel du Vin | 205,649 | 215,061 | (9,412) | 1,647 | (7,765) |
+------------------+-----------+-----------+------------+-----------+-------------+
| Liberty Plc | 28,800 | 29,547 | (747) | 237 | (510) |
+------------------+-----------+-----------+------------+-----------+-------------+
| | 510,022 | 520,314 | (10,292) | 1,907 | (8,385) |
+------------------+-----------+-----------+------------+-----------+-------------+
The uncertainties in the financial markets caused property prices in the market
to decline in the first six months of the year under review. This was reflected
in the GBP10.3m decline in the Group property portfolio value recorded in June
2009. However, this decline has decelerated in the second half of the year as
GBP8.2m of the first half year decline was reversed reducing the overall fall in
value to GBP2.1m for the year. The Group share of the valuation surplus
credited to the revaluation reserve during this second six months of the year to
31 December 2009 amounted to GBP6.5m and arose as follows:-
+--------------------+-----------+----------+---------+-----------+-------------+
| Six months to | Gross | Less | Gross | Less | Credited |
| 31 December 2009 | valuation | previous | surplus | minority | to |
| | | book | | interests | revaluation |
| | | value | | | reserve |
+--------------------+-----------+----------+---------+-----------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+-----------+----------+---------+-----------+-------------+
| Malmaison | 273,790 | 272,553 | 1,237 | (216) | 1,021 |
+--------------------+-----------+----------+---------+-----------+-------------+
| Hotel du Vin | 209,460 | 204,242 | 5,218 | (914) | 4,304 |
+--------------------+-----------+----------+---------+-----------+-------------+
| Liberty Plc | 30,250 | 28,554 | 1,696 | (537) | 1,159 |
+--------------------+-----------+----------+---------+-----------+-------------+
| | 513,500 | 505,349 | 8,151 | (1,667) | 6,484 |
+--------------------+-----------+----------+---------+-----------+-------------+
The valuation deficit debited to the revaluation reserve for the year ended 31
December 2009 (being the deficit of GBP8.4m in the first half and surplus of
GBP6.5m in the second half summarised in the tables above) amounted to GBP1.9m
and arose as follows:-
+--------------------+-----------+----------+-----------+-----------+-------------+
| Year to 31 | Gross | Less | Gross | Less | Credited/ |
| December 2009 | valuation | previous | surplus/ | minority | (Debited) |
| | | book | (deficit) | interests | to |
| | | value | | | revaluation |
| | | | | | reserve |
+--------------------+-----------+----------+-----------+-----------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+-----------+----------+-----------+-----------+-------------+
| Malmaison | 273,790 | 272,686 | 1,104 | (193) | 911 |
+--------------------+-----------+----------+-----------+-----------+-------------+
| Hotel du Vin | 209,460 | 213,654 | (4,194) | 733 | (3,461) |
+--------------------+-----------+----------+-----------+-----------+-------------+
| Liberty Plc | 30,250 | 29,301 | 949 | (300) | 649 |
+--------------------+-----------+----------+-----------+-----------+-------------+
| | 513,500 | 515,641 | (2,141) | 240 | (1,901) |
+--------------------+-----------+----------+-----------+-----------+-------------+
Portfolio analysis by division
At 31 December 2009, the Group's interests are disclosed in the Consolidated
Statement of Financial Position as follows:-
+---------------------------------------------+------------+-----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+---------------------------------------------+------------+-----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+-----------+
| Non current assets | | |
+---------------------------------------------+------------+-----------+
| Operational properties | 499,414 | 502,644 |
+---------------------------------------------+------------+-----------+
| Operational properties in the course of | 1,929 | 1,691 |
| construction | | |
+---------------------------------------------+------------+-----------+
| Plant and equipment | 58,123 | 61,597 |
+---------------------------------------------+------------+-----------+
| Total property interests at year end | 559,466 | 565,932 |
+---------------------------------------------+------------+-----------+
The above interests are analysed as follows:-
+-----------------------+-------------+------------+--------------+------------+
| | | Percentage | | Percentage |
| | | at | | at |
+-----------------------+-------------+------------+--------------+------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
+-----------------------+-------------+------------+--------------+------------+
| | 2009 | 2009 | 2008 | 2008 |
+-----------------------+-------------+------------+--------------+------------+
| | GBP'000 | % | GBP'000 | % |
+-----------------------+-------------+------------+--------------+------------+
| Hotels | | | | |
+-----------------------+-------------+------------+--------------+------------+
| Malmaison | 271,457 | 48 | 275,450 | 49 |
+-----------------------+-------------+------------+--------------+------------+
| Hotel du Vin | 211,628 | 38 | 217,861 | 38 |
+-----------------------+-------------+------------+--------------+------------+
| | 483,085 | 86 | 493,311 | 87 |
+-----------------------+-------------+------------+--------------+------------+
| MWB Business Exchange | 44,464 | 8 | 41,535 | 7 |
| Plc | | | | |
+-----------------------+-------------+------------+--------------+------------+
| Liberty Plc | 31,858 | 6 | 31,006 | 6 |
+-----------------------+-------------+------------+--------------+------------+
| Other | 59 | - | 80 | - |
+-----------------------+-------------+------------+--------------+------------+
| Total property | | | | |
| interests at | | | | |
+-----------------------+-------------+------------+--------------+------------+
| year end | 559,466 | 100 | 565,932 | 100 |
+-----------------------+-------------+------------+--------------+------------+
INTANGIBLE ASSETS
Intangible assets comprise the goodwill on the acquisition of Liberty in 2000,
Stanhope Business Centres in 2007 and the MLS business centres in 2009.
During the year ended 30 June 2000, GBP18.2m of goodwill arose on the
acquisition of the Liberty group and brand. An impairment review of the
carrying value of this brand was undertaken by the Directors on 31 December 2009
by comparing the carrying amount with the value in use. At 31 December 2009,
the value in use was determined by the Company by discounting future cash flows
generated from continuing use of the cash generating unit. This is based on
projected cash flows in Liberty's 5 year business plan and further projections
for years 6 to 10 to produce a 10 year cash flow model. Based on this review,
the Directors concluded that there had been no impairment of the Liberty brand
value during the year ended 31 December 2009.
An impairment review of the Stanhope Business Centres goodwill was undertaken by
the Directors on 31 December 2009 comparing the carrying value of goodwill with
the anticipated recoverable amount of the two business centres owned by Stanhope
Business Centres. The recoverable amount of the cash-generating unit is based
on value in use, which is calculated from cash flow projections for the
lifetimes of the underlying leases, using data from Board approved budgets
covering the period to 31 December 2011. Based on this review, the Directors
concluded that there had been no impairment to the Stanhope Business Centres
goodwill during the year ended 31 December 2009.
Further goodwill of GBP2.8m arose during 2009 when the Group acquired 16 former
MLS Group PLC ("MLS") business centres. These centres are complementary to MWB
Business Exchange's portfolio and in line with its stated strategy of focusing
on London and the surrounding area. The centres are held in a newly
incorporated sub-group headed by MWB Executive Centres (Holdings) Ltd, of which
the Group owns 65%. The goodwill recognised arises from the synergies forecast
to be gained from the assimilation of the new centres into the Group's network
and the strengthening of its brands to become the dominant provider of serviced
office accommodation in the London region. An impairment review of the goodwill
arising on the acquisition of the MLS centres was undertaken by the Directors at
31 December 2009 comparing the carrying value of goodwill with the recoverable
amount of the cash-generating units to which goodwill was allocated. As a
result of this review, the Directors have determined that there has been no
impairment to goodwill during the year ended 31 December 2009.
REVIEW OF LOAN FACILITIES
Net debt
The Group's loans, borrowings and cash are included in the Consolidated
Statement of Financial Position at 31 December 2009 as follows:-
+-----------------------------------------------+------------+-----------+
| Composition at year end | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------------+------------+-----------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+------------+-----------+
| Loans and borrowings | 376,004 | 387,193 |
+-----------------------------------------------+------------+-----------+
| Long leasehold obligations | 697 | 699 |
+-----------------------------------------------+------------+-----------+
| Hire purchase and leasing contracts | 192 | - |
+-----------------------------------------------+------------+-----------+
| Fair value of derivative financial | 5,526 | 1,894 |
| instruments | | |
+-----------------------------------------------+------------+-----------+
| Total loans and borrowings | 382,419 | 389,786 |
+-----------------------------------------------+------------+-----------+
| Less net cash and cash equivalents | (19,655) | (32,036) |
+-----------------------------------------------+------------+-----------+
| Total net debt at year end | 362,764 | 357,750 |
+-----------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------+------------+-----------+
| Analysis of debt/(cash) by operating business | | |
+-----------------------------------------------+------------+-----------+
| | | |
+-----------------------------------------------+------------+-----------+
| Malmaison and Hotel du Vin | 278,357 | 282,322 |
+-----------------------------------------------+------------+-----------+
| MWB Business Exchange Plc | (6,241) | (16,404) |
+-----------------------------------------------+------------+-----------+
| Liberty Plc | 10,601 | 12,390 |
+-----------------------------------------------+------------+-----------+
| Central debt | 80,047 | 79,442 |
+-----------------------------------------------+------------+-----------+
| | 362,764 | 357,750 |
+-----------------------------------------------+------------+-----------+
Net cash
The Group's cash and overdrafts are held in the following operating divisions in
the Group:-
+----------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+----------------------------------------------+------------+----------+
| Malmaison and Hotel du Vin | 9,011 | 4,860 |
+----------------------------------------------+------------+----------+
| MWB Business Exchange Plc | 6,433 | 23,333 |
+----------------------------------------------+------------+----------+
| Liberty Plc | 1,943 | 1,903 |
+----------------------------------------------+------------+----------+
| Central | 2,268 | 1,940 |
+----------------------------------------------+------------+----------+
| | 19,655 | 32,036 |
+----------------------------------------------+------------+----------+
Cash balances are held within the above divisions for utilisation within their
businesses. Generally only cash within the Central division and the financing
facilities available to the Company are 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 2009 arose as
follows:-
+-----------------------------------------------+-----------+-----------+
| | Year | Year |
| | ended | ended |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+-----------+-----------+
| Total net debt at start of the year | 357,750 | 308,012 |
+-----------------------------------------------+-----------+-----------+
| Debt (amortised)/drawn Malmaison and Hotel du | (1,431) | 38,150 |
| Vin | | |
+-----------------------------------------------+-----------+-----------+
| Buy back of ordinary shares | 1,701 | 10,078 |
+-----------------------------------------------+-----------+-----------+
| Dividends paid to subsidiary minority | 2,808 | - |
| interests | | |
+-----------------------------------------------+-----------+-----------+
| Net cash outflow from other Group operations | 1,936 | 1,510 |
| during the year | | |
+-----------------------------------------------+-----------+-----------+
| Total net debt at year end | 362,764 | 357,750 |
+-----------------------------------------------+-----------+-----------+
| | | |
+-----------------------------------------------+-----------+-----------+
| Average cost of borrowings at year end, | 5.6% | 7.4% |
| inclusive of margin | | |
+-----------------------------------------------+-----------+-----------+
Net debt relating to Equity attributable to shareholders of MWB
The net debt relating to equity attributable to shareholders of MWB Group
Holdings Plc at 31 December 2009 amounted to GBP312m (2008: GBP310m), calculated
as follows:-
+------------------------------------------------+------------+-----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+-----------+
| Total net debt as above | 362,764 | 357,750 |
+------------------------------------------------+------------+-----------+
| Less net debt attributable to minority | (50,292) | (48,118) |
| interests | | |
+------------------------------------------------+------------+-----------+
| Total net debt attributable to equity | | |
| attributable to | | |
+------------------------------------------------+------------+-----------+
| shareholders of MWB Group Holdings Plc | 312,472 | 309,632 |
+------------------------------------------------+------------+-----------+
Review of available bank facilities
On 27 April 2009, the Group extended GBP348m of its banking facilities provided
by Bank of Scotland and Royal Bank of Scotland. The terms of these facilities,
comprising three separate loans to Malmaison and Hotel du Vin, MWB Business
Exchange and MWB itself, previously ran to the end of 2009, but have now been
extended to 31 December 2011. In December 2009 the Liberty facility was also
extended to 31 December 2011. This significant extension has however not been
achieved without cost but the Directors strongly believe it is in the Group's
long term interests to extend these facilities given the current level of
illiquidity in the financial markets.
The Board's approach to managing liquidity is to ensure, as far as possible,
that the Group will always have sufficient funds to meet its liabilities as they
fall due, without incurring unacceptable losses or risking damage to the Group's
reputation in its business sectors. The Group uses detailed divisional cash
flow reporting to assist the Board in monitoring cash flow requirements and
optimising cash returns on investments across the whole Group. The Group
typically ensures it has sufficient forecast cash and available facilities to
meet expected cash outflows for a forward period of 18 months. The Group meets
its day to day working capital requirements through cash generated in its
operating businesses, Liberty, Malmaison and Hotel du Vin and Business Exchange,
and from its loan and overdraft facilities. The Group's facilities include
interest cover and gearing covenants with which the Group is in compliance at 31
December 2009.
On 17 December 2009 the Group announced a Placing of 91,666,667 New Units at 30
pence per New Unit. This Placing was successfully completed on 12 January 2010
following a General Meeting of the Company. The Placing raised GBP27.5m in
gross proceeds, of which GBP7.5m was applied to purchase for cancellation
GBP7.5m of the Loan Stock and GBP2.9m was paid in fees. The net proceeds
received by the Company after the Placing amounted to GBP24.6m.
Review of available bank facilities
In addition to the cash raised, amendments to the Loan Stock gearing covenant
were also implemented at a meeting of Loan Stockholders on 11 January 2010.
Previously the Group's borrowings could not exceed four times Shareholders'
funds excluding intangible assets and goodwill. The Loan Stock gearing covenant
has now been amended in line with the Company's Articles of Association, such
that the Group's borrowings must not exceed five times Shareholders' funds with
the inclusion of intangible assets and goodwill.
Loan covenants
The Malmaison and Hotel du Vin division has four covenant tests in its banking
facility, being EBITDA to Interest Cover, Cashflow Cover, Loan to Value Cover
and Debt to EBITDA Cover. All loan covenants were met for the year ended 31
December 2009. The Malmaison and Hotel du Vin Loan to Value Covenant requires
the loan to be no more than 72.5% of the value of the secured property. At 31
December 2009, the Loan to Value percentage amounted to 58.8% of the secured
property value of GBP483m. Accordingly, the portfolio value would have to
decrease by approximately GBP92m or more before this covenant would not be
satisfied. Given the continued strong performance of Malmaison and Hotel du
Vin, and the revenue and cost saving initiatives the Directors have at their
disposal, the Directors, after taking advice from the Company's property valuers
DTZ, consider it unlikely that this portfolio would suffer such a high level of
decline in property value over the period covered by their cash flow
projections.
Business Exchange has three covenant tests in relation to its bank facility,
namely Debt Service Cover, Senior Interest Cover and EBITDA to Debt Cover. Debt
Service Cover requires the ratio of Net Cash to Senior Interest to be not less
than 1:1; Senior Interest Cover requires the ratio of EBIT to Senior Interest to
be not less than 4:1; and EBITDA to Debt Cover requires the ratio of EBITDA to
Debt to be not less than 1:1. These covenants were all met for the year ended
31 December 2009. At 31 December 2009, the Business Exchange loan was not drawn
down. The Directors monitor adherence to these covenants carefully and take
steps to ensure adherence at all times. In addition to this, Management has put
in place revenue preservation and cost savings plans which are anticipated to
further benefit EBITDA and cash flow for 2010 and future years. On 17 December
2009 the facility was further amended to, amongst other things, permit Business
Exchange to cash cure any potential breaches of financial covenants that might
occur with 14 days of the relevant test date provided that the maximum amount of
cash cure in any six consecutive test periods is GBP2.0m.
Liberty has three covenant tests in relation to its bank facility, namely Loan
to Value Security Cover, Debt Service Cover and Senior Interest Cover, with
Liberty of London brand costs and other one-off costs excluded from the test of
the latter two. Security Cover requires the loan to be no more than 67% of the
Realisation Value of the Tudor Building. At 31 December 2009, the Tudor
Building was valued at GBP30.25m, and GBP12.5m of facilities were utilised.
Accordingly, the Loan to Value Security Cover was only 41% at that date,
demonstrating significant headroom. Sufficient headroom is also forecast over
the period covered by the Projections. Debt Service Cover requires the ratio of
EBITDA to Total Debt Service to be not less than 1.25:1. Senior Interest Cover
requires the ratio of EBIT to Senior Interest to be not less than 1.5:1. These
covenants were met for the year ended 31 December 2009. The Directors continue
to monitor adherence to these covenants carefully and to take reasonable steps
to ensure adherence at all times. The bank facility also permits the Group to
cash cure any breach that might occur within 14 days of the relevant test date
provided that the maximum amount of cash cure in any two consecutive periods is
GBP2.0m.
MWB Group Holdings Plc itself has two covenants in relation to its bank
facility. These covenants require consolidated EBITDA to be 125% or more of
consolidated interest expense, and for the MWB Group Holdings Plc debt,
excluding the Company's Unsecured Loan Stock, to be capped at 150% of
consolidated EBITDA. MWB Group Holdings is forecast to meet its covenants with
headroom during the eighteen months covered by the Group cash flow forecasts.
The covenant in relation to MWB Group Holdings' Unsecured Loan Stock includes a
gearing covenant restricting net debt attributable to shareholders to a maximum
of four times adjusted shareholders' funds. This covenant was met at 31
December 2009 with headroom of GBP15m in adjusted shareholders' funds. On 11
January 2010 Loan Stockholders approved resolutions amending the gearing
covenant such that net debt attributable to Shareholders must not exceed five
times rather than four Shareholders' funds and that the definition of
Shareholders' funds now includes intangibles and goodwill whereas these were
previously excluded. If this covenant had been tested on the new basis at 31
December 2009 the headroom in adjusted shareholders' funds would be GBP44m.
Further information relating to the basis of preparation of the financial
statements and the Group's forecast loan covenant compliance is set out in note
1 to the financial statements.
Gearing
At 31 December 2009, gearing was 206%, calculated as follows:-
+---------------------------------------------+-----------+------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+---------------------------------------------+-----------+------------+
| | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+------------+
| Total net debt | 362,764 | 357,750 |
+---------------------------------------------+-----------+------------+
| Net assets | 176,249 | 203,799 |
+---------------------------------------------+-----------+------------+
| Gearing - total net debt divided by net | 206% | 176% |
| assets | | |
+---------------------------------------------+-----------+------------+
REVIEW OF EARNINGS
Results
The total comprehensive income and expense for the year ended 31 December 2009,
analysed between the share attributable to shareholders of MWB Group Holdings
Plc and the share attributable to minority interests, is as follows:-
+----------------------------------------+--------------+-----------+--------------+
| | | | Equity |
+----------------------------------------+--------------+-----------+--------------+
| | | | Shareholders |
| | | | of |
+----------------------------------------+--------------+-----------+--------------+
| | Total | Minority | MWB Group |
| | for | | |
+----------------------------------------+--------------+-----------+--------------+
| | the | interests | Holdings |
| | year | | Plc |
+----------------------------------------+--------------+-----------+--------------+
| Year ended 31 December 2009 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+--------------+-----------+--------------+
| Income statement | | | |
+----------------------------------------+--------------+-----------+--------------+
| Loss for the year | (16,077) | (129) | (15,948) |
+----------------------------------------+--------------+-----------+--------------+
| Charged to equity through reserves | | | |
+----------------------------------------+--------------+-----------+--------------+
| Foreign exchange translation | | | |
| differences for foreign | | | |
+----------------------------------------+--------------+-----------+--------------+
| operations | (222) | (70) | (152) |
+----------------------------------------+--------------+-----------+--------------+
| Revaluation of property, plant and | (2,141) | (240) | (1,901) |
| equipment | | | |
+----------------------------------------+--------------+-----------+--------------+
| Effective portion of changes in fair | | | |
| value of | | | |
+----------------------------------------+--------------+-----------+--------------+
| cash flow hedges | (3,290) | (577) | (2,713) |
+----------------------------------------+--------------+-----------+--------------+
| Defined benefit pension scheme | (995) | (315) | (680) |
| actuarial losses | | | |
+----------------------------------------+--------------+-----------+--------------+
| Total comprehensive income and expense | | | |
+----------------------------------------+--------------+-----------+--------------+
| for the year | (22,725) | (1,331) | (21,394) |
+----------------------------------------+--------------+-----------+--------------+
+----------------------------------------+-----------+------------+--------------+
| | | | Equity |
+----------------------------------------+-----------+------------+--------------+
| | | | Shareholders |
| | | | of |
+----------------------------------------+-----------+------------+--------------+
| | Total | Minority | MWB Group |
| | for | | |
+----------------------------------------+-----------+------------+--------------+
| | the | interests | Holdings |
| | year | | Plc |
+----------------------------------------+-----------+------------+--------------+
| Year ended 31 December 2008 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+-----------+------------+--------------+
| Income statement | | | |
+----------------------------------------+-----------+------------+--------------+
| Profit/(loss) for the year | 289 | 3,007 | (2,718) |
+----------------------------------------+-----------+------------+--------------+
| Credited/(charged) to equity through | | | |
| reserves | | | |
+----------------------------------------+-----------+------------+--------------+
| Foreign exchange translation | | | |
| differences for foreign | | | |
+----------------------------------------+-----------+------------+--------------+
| operations | 1,076 | 351 | 725 |
+----------------------------------------+-----------+------------+--------------+
| Revaluation of property, plant and | (79,231) | (14,364) | (64,867) |
| equipment | | | |
+----------------------------------------+-----------+------------+--------------+
| Effective portion of changes in fair | | | |
| value of | | | |
+----------------------------------------+-----------+------------+--------------+
| cash flow hedges | (2,243) | (393) | (1,850) |
+----------------------------------------+-----------+------------+--------------+
| Defined benefit pension scheme | (2,019) | (640) | (1,379) |
| actuarial losses | | | |
+----------------------------------------+-----------+------------+--------------+
| | | | |
+----------------------------------------+-----------+------------+--------------+
| Total comprehensive income and expense | | | |
+----------------------------------------+-----------+------------+--------------+
| for the year | (82,128) | (12,039) | (70,089) |
+----------------------------------------+-----------+------------+--------------+
A segmental analysis of the Revenue, EBITDA, EBIT and Profit Before Tax for the
current and previous year under review can be found in note 2 of these financial
statements.
Taxation
The net amount of tax borne by equity shareholders of MWB Group for the year
ended 31 December 2009 amounted to GBP0.4m (2008: GBP10.3m credited to equity
shareholders) and arose as follows:-
+----------------------------------------------+-----------+----------+
| | Year | Year |
| | ended | ended |
+----------------------------------------------+-----------+----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+-----------+----------+
| | 2009 | 2008 |
+----------------------------------------------+-----------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+-----------+----------+
| Corporation tax (charge)/credit | (7) | 16,402 |
+----------------------------------------------+-----------+----------+
| Foreign tax | (690) | (395) |
+----------------------------------------------+-----------+----------+
| Deferred tax credit/(charge) | 42 | (5,792) |
+----------------------------------------------+-----------+----------+
| Net tax (charge)/credit per Consolidated | (655) | 10,215 |
| Income Statement | | |
+----------------------------------------------+-----------+----------+
| | | |
+----------------------------------------------+-----------+----------+
| 28% minority interest in tax credit/(charge) | | |
| of | | |
+----------------------------------------------+-----------+----------+
| MWB Business Exchange Plc | 3 | (25) |
+----------------------------------------------+-----------+----------+
| | | |
+----------------------------------------------+-----------+----------+
| 32% minority interest in tax charge of | 221 | 126 |
| Liberty Plc | | |
+----------------------------------------------+-----------+----------+
| Net tax amount (borne by)/credited to equity | | |
| shareholders of | | |
+----------------------------------------------+-----------+----------+
| MWB Group Holdings Plc | (431) | 10,316 |
+----------------------------------------------+-----------+----------+
Loss per share
The loss per share figures have been calculated as follows:-
+---------------------------------------+---------+-----------+-----------+
| | | Year | Year |
| | | ended | ended |
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+---------------------------------------+---------+-----------+-----------+
| Loss per Consolidated Income | | | |
| Statement attributable | | | |
+---------------------------------------+---------+-----------+-----------+
| to shareholders of MWB Group | GBP'000 | (15,948) | (2,718) |
| Holdings Plc | | | |
+---------------------------------------+---------+-----------+-----------+
| | | | |
+---------------------------------------+---------+-----------+-----------+
| Weighted average number of shares in | | | |
| issue during | | | |
+---------------------------------------+---------+-----------+-----------+
| Year | '000 | 72,371 | 76,291 |
+---------------------------------------+---------+-----------+-----------+
| | | | |
+---------------------------------------+---------+-----------+-----------+
| Loss per share based on Consolidated | | | |
| Income | | | |
+---------------------------------------+---------+-----------+-----------+
| Statement | Pence | | (3.6p) |
| | | (22.0p) | |
+---------------------------------------+---------+-----------+-----------+
Dividend
The Board is continuing to implement the Cash Distribution Programme and to
direct disposal proceeds to the repayment of net debt and the return of funds to
Shareholders. Accordingly, no dividends have been declared in relation to the
year ended 31 December 2009.
Whilst the payment of dividends remains an option, once surplus funds have been
realised, 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 value distribution
programmes during the remainder of the Cash Distribution Programme to December
2016.
Cash flow
The consolidated cash flow statement shows the funds generated by the Group,
those raised from external sources, the investments made and the effect thereof
on the Group's cash and cash equivalents.
This can be summarised as follows:-
+----------------------------------------------+-----------+----------+
| | Year | Year |
| | ended | ended |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+----------------------------------------------+-----------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+-----------+----------+
| Net cash inflow from operating activities | 19,076 | 14,294 |
+----------------------------------------------+-----------+----------+
| Net cash outflow from investing activities | (15,161) | (51,637) |
+----------------------------------------------+-----------+----------+
| Net cash (used in)/received from financing | (16,296) | 46,494 |
| activities | | |
+----------------------------------------------+-----------+----------+
| Net (decrease)/increase in cash and cash | (12,381) | 9,151 |
| equivalents | | |
+----------------------------------------------+-----------+----------+
| | | |
+----------------------------------------------+-----------+----------+
| Opening cash and cash equivalents | 32,036 | 22,885 |
+----------------------------------------------+-----------+----------+
| Closing cash and cash equivalents | 19,655 | 32,036 |
+----------------------------------------------+-----------+----------+
Post balance sheet events
On 11 January 2010, the Company raised GBP27.5m through the issue of 91,666,667
New Units at 30 pence each. As a result, Units in issue after the Placing at
the date of these financial statements amounted to 164,038,149. These monies
had been raised in order to provide the Company with a stronger financial base
increasing headroom and flexibility in relation to banking covenants and ongoing
funding requirements.
The monies raised were applied as follows: the cancellation of GBP7.5m of
Unsecured Loan Stock, transaction fees of GBP2.9m, termination payments
amounting to GBP1.65m to Andrew Blurton, the former Joint Finance Director, the
repayment of a GBP4.0m intra-group loan from MWB Business Exchange, with the
remaining balance of GBP11.4m being available for working capital and bank loan
repayment.
Despite the current market uncertainties, on 12 March the Company announced that
it had received approaches that could lead to an offer being made for Liberty,
the Group's retail operator. At the date of these financial statements
discussions in relation to these approaches are continuing and the Company will
report to Shareholders when there is further news. In addition, on 15 March
2010, the Company announced that contracts had been exchanged for the sale and
leaseback of the freehold of the Liberty flagship store for GBP41.5m, subject to
Shareholder approval in General Meeting. The proceeds from this sale will be
used to repay all bank borrowings in Liberty and inter-group debt previously
provided by MWB, with the remainder available as working capital.
Conclusion
MWB has three good operating businesses. They are all well managed, have a
strong financial base and provide excellent products and services. Each
business has demonstrated its ability to deliver creditable results, even in
these tough market conditions.
Jagtar Singh
Finance Director
30 March 2010
BUSINESS RISKS AND UNCERTAINTIES
Risk factors relating to the Group as a whole
The Board and the Senior Executive team identify and evaluate risks and
uncertainties in the period covered by the Group Business Plan and design
controls to mitigate these. Responsibility for management of each key risk is
identified and delegated by the Board to specific Executive Directors and Senior
Executives within each of the Group's operating businesses.
This section of the report describes some of the specific risks that could
materially affect the Group's business, its operating profits, earnings, net
assets, liquidity and capital resources. The risks outlined below should be
considered in connection with any financial and forward-looking information in
the financial statements. The risks below are not the only ones that the Group
faces and some that the Group does not currently believe to be material could
later turn out to be material.
Continuing adverse economic conditions may have a material adverse effect on the
Group's results
The Group's operating and financial performance is affected by the economic
conditions both in the United Kingdom (from where 92.9% of the Group's revenue
was derived in the year ended 31 December 2009) where the effects of a severe
economic recession are currently being experienced, and worldwide. The current
challenging economic conditions in the United Kingdom and worldwide, including
factors relating to the prevailing levels of employment, real disposable income,
salaries, wage rates, market rent levels, availability of funding, business and
consumer confidence, consumer demand, tourism and business and consumer
perception of economic conditions, could result in further reductions in asset
values (including the Group's properties) and the Group's business volumes and
have a material adverse effect on the Group's business, financial condition and
operating results. A further worsening of economic conditions in the UK is
likely to have a further material adverse effect on the Group.
The Group's longer term ability to refinance its debt facilities upon maturity
may be restricted
The Malmaison and Hotel du Vin, Business Exchange, Liberty and MWB bank finance
facilities mature in December 2011 (GBP284m, GBP8m, GBP15m and GBP53m
respectively). The longer term ability of the Group to repay and/or refinance
its existing debt facilities is dependent on its future performance, which will
be affected by a number of factors, including general, economic, political, debt
and equity capital market conditions, credit availability and the willingness of
lending banks to lend to the hotel, serviced office and retail sectors. If the
Group were to be unable in the longer term to service its borrowings and/or
repay its borrowings when due, it might not be able to refinance its debt or
ensure its debt continues to be available to it, or the Group might only be able
to secure its funding at a significantly increased cost. There is also a risk
that funding will not be made available to the Group in the longer term or that
the cost of accessing and servicing the funding may be prohibitive. The Group
could therefore be forced to sell its assets in order to comply with its
obligations under its existing debt facilities, and sales in such circumstances
may not deliver the level of proceeds that may otherwise be expected. This may
have a material adverse effect on the Group's business, results of operations
and overall financial condition.
MWB's financial indebtedness and the covenants contained in the Group's debt
facilities could restrict the Group's flexibility and limit its ability to
withstand adverse trading conditions
The existing level of MWB's financial indebtedness and gearing, combined with
the financial covenants that are contained in its principal debt facility
agreements, could restrict the operational flexibility and management decisions
of the Group, place the Group at a disadvantage in relation to competitors that
have less debt and increase the Group's vulnerability to, and limit its ability
to withstand, any continuation of adverse economic and sector conditions. The
above factors could have a material adverse effect on the Group business,
results of operations and overall financial condition.
The Group may be affected adversely in the longer term by further declines in
property values
The Group owns freehold and long leasehold interests in properties located in
the UK. These properties are used by the Group from which to operate the
Malmaison and Hotel Du Vin and Liberty businesses and are the principal assets
in the Consolidated Statement of Financial Position of the Group. At 31
December 2009 these had a book value, reflecting a professional external open
market value at that date, of GBP559.5m. This reflects a cumulative unrealised
valuation surplus of GBP150.1m.
The disruption in the financial markets over the last two years and the severe
economic recession as described in the paragraph headed "Continuing adverse
economic conditions may have a material adverse effect on the Group's results"
have adversely affected and may continue to adversely affect the Group's
property values. In the year ended 31 December 2009 the Group's property values
reduced by GBP2.1m, of which GBP1.9m was attributable to Shareholders. Reduction
in value of the Group's properties through revaluations, impacts both
Shareholders' funds and also gearing and loan to value covenants in Malmaison
and Hotel du Vin's and Liberty's respective banking facilities and in the Loan
Stock Trust Deed.
Further reductions in property values could in the longer term have a material
adverse effect on the Group's businesses, financial condition or operating
results.
Effects of downturn in travel may adversely affect the Group
The Group is dependent for part of its revenue on tourists and business
travellers. The Group's results could be adversely affected by events that
reduce travel including adverse economic conditions, such as those currently
being experienced, a decrease in travel to London where Liberty operates or
travel to areas where Malmaison and Hotel du Vin operates hotels. Additional
causes of reduced travel may include actual or threatened acts of terrorism or
war, epidemics, travel-related accidents or industrial action, increased
transportation and fuel costs and natural disasters. Any of these factors could
have a material adverse effect on the Group's businesses, financial condition or
results of operations.
The Group may be adversely affected by an increase in operating costs
The Group's operating and other expenses could increase without a corresponding
increase in turnover. Factors which could increase operating and other expenses
include increases in the rate of cost inflation (including energy costs),
increases in payroll (including any increases in the minimum wage), taxes and
other statutory charges, insurance premia, rent, rates and the costs of
maintenance of properties and failure to perform by third parties and
sub-contractors leading to increases in operating costs. Such increases could
have a material adverse effect on the Group's business, financial conditions or
results of operations.
The Company's ability to make distributions to Shareholders in the future is
dependent on the realisation of assets
The ability of the Company to make distributions in the future to Shareholders
by means of buy-backs of Units, tender offers to Shareholders, cash
distributions, demergers, distributions of assets and similar value distribution
programmes in accordance with its strategy is dependent upon it having
sufficient cash resources, or assets (in the case of distributions in kind), out
of which any proposed distributions may be made. There are risks and
uncertainties which could adversely affect the net assets available for
distribution to Shareholders. Such risks include, but are not restricted to, the
ability of the Group to realise its assets in the manner and amount currently
envisaged and distribution of funds to Shareholders in an efficient manner as
well as all the other risks referred to in this section of the document which
could materially adversely affect the Group's businesses, financial condition or
results of operations.
The Group is exposed to interest rate and counterparty credit risks
The Group borrows from banks at floating rates of interest, although the GBP284m
facility advanced to Malmaison and Hotel du Vin has been swapped by the Group
into fixed rates to the end of its term in December 2011 using financial
derivative instruments. Upon any refinancing the Group might use fixed and/or
floating rate borrowings designed to protect the Group in the drawings of its
cash requirements. Fixed rate borrowings are exposed to a risk of change in
their fair value due to changes in interest rates. Variable rate borrowings are
exposed to a risk of change in cash flows due to changes in interest rates. If
interest rates rise then the Group's cost of variable rate borrowings would
increase.
The Group is reliant in part on the reputation of its brands
The Group operates under four core brands, namely Liberty, Malmaison, Hotel du
Vin and MWB Business Exchange. If an event occurred that materially damaged the
reputation of any of these core brands or there was a failure to sustain the
appeal of the Group's brands to its customers, this could have an adverse impact
on the Group's earnings and assets and resultant Shareholder value.
Unfavourable publicity concerning any of the Group's brands or substantial
erosion in the reputation of, or value associated with, the Group's brands could
have an adverse effect on the Group's businesses, financial condition or results
of operations.
Loss of Executive Directors and other key personnel may adversely affect the
Group
The Group is highly dependent on its team of Executive Directors and senior
executives who have extensive experience and knowledge of the relevant industry
in which they work. The future success of the Group is, in part, dependent upon
the ability of its existing management team and on the Group's ability to
motivate and retain staff with the requisite experience. However, there can be
no assurance that the Executive Directors or Group's other key personnel will
continue to be employed by the Group, that the Executive Directors and senior
executives will be suitably incentivised or that it will be able to attract and
retain qualified personnel in the future. The loss of services of Executive
Directors or key personnel, or a failure to attract and retain these and other
qualified new personnel, could have a material adverse effect on the Group's
businesses, financial condition or results of operations.
Influence of the 1997 Concert Party
The 1997 Concert Party owns 33.51 per cent of the Enlarged Issued Share Capital.
As a consequence, the 1997 Concert Party is able to exercise a significant
amount of control over the voting of Shareholders in the Company. For example,
where the consent of 75% or more of Shareholders is required in general meeting,
it will not be possible to obtain that majority unless the 1997 Concert Party
votes in favour or abstains from voting. Where the consent of 50% or more of
Shareholders is required in general meeting, it will usually be possible for the
1997 Concert Party to obtain that majority unless other Shareholders join
together to vote against the relevant resolution.
Conflicts of interest may arise by reason of certain of the interests of the
Executive Directors outside the Group
The Executive Directors have material business interests outside the Group.
Despite the existence of the Conflicts Committee and anti-conflicts procedures
in the governance of the Group, the interests of the Executive Directors outside
the Group could give rise to actual or potential conflicts of interest between
their roles as Directors of and Shareholders in the Company and of other
companies in the Group, and their roles and interests outside the Group, which
could affect the business of the Group. This is particularly the case with
Malmaison and Hotel du Vin where the outside hotel interests of the Executive
Directors could in future be in competition with the Group.
The Group could suffer material losses in excess of insurance proceeds
Any of the Group's properties or other assets could suffer physical damage
caused by fire or other causes, resulting in losses that may not be fully
compensated by insurance. In addition, there are certain types of losses,
generally of a catastrophic nature, such as earthquakes, floods, hurricanes,
terrorism or acts of war, which may be uninsurable on economic terms or at all.
Inflation, changes in building codes and ordinances, environmental
considerations, and other factors might also result in losses that may not be
fully compensated by insurance proceeds. Should an uninsured loss or a loss in
excess of insured limits occur, the Group would lose capital and anticipated
future revenue. In addition, the Group may incur further costs to repair damage
caused by uninsured risks. The Group would also remain liable for any debt or
other financial obligation related to that part of the business in which the
uninsured risk has occurred.
Technology and systems disruption may adversely affect the Group's efficiency
To varying degrees, the Group is reliant upon technologies and systems for the
running of its businesses, particularly those which are highly integrated with
business processes. Any disruption to those technologies or systems could
adversely affect the efficiency of the business.
The Group may have to make substantial additional investments in new
technologies or systems to remain competitive. Failing to keep pace with
developments in technologies or systems may put the Group at a competitive
disadvantage. The technologies or systems that the Group chooses may not be
commercially successful or the technology or system strategy employed may not be
sufficiently aligned with the needs of the business or responsive to changes in
business strategy. As a result, the Group could lose customers, fail to attract
new customers or incur substantial costs or face other losses.
The Group's operations are subject to health and safety and other regulations
The Group needs to comply with regulations relating to, amongst others,
planning, land use, building regulation standards, health and safety,
environmental matters and employment. Significant events or breaches or
violations of applicable laws or regulations could result in restrictions on
operations, damages, fines, litigation and/or other sanctions and/or result in
MWB incurring liabilities which, in turn, could have a material adverse effect
on the Group's businesses, results of operations and overall financial condition
or adversely affect the value of the Group's assets. Changes in the legal
framework in particular concerning planning, land use and building regulations,
may negatively influence property values. From time to time, regulations are
introduced which can impact on the costs of the Group's businesses and affect
returns. In recent years these have included building regulations for the
containment and management of asbestos and the measurement and reporting of
energy efficiency of buildings. Such changes in the future could have an adverse
impact on the value of the Group's businesses, financial condition or results of
operations.
The Group may incur environmental liabilities resulting from ownership of
property
The Board views the assessment of environmental risk as an important element of
its due diligence process when it acquires its properties. However, there can be
no guarantee that the Group will not incur unexpected liabilities such as
clean-up costs and fines for environmental pollution in respect of properties
owned by the Group.
The costs of any required clean-up of or fines for environmental pollution may
be substantial regardless of whether the Group originally caused the relevant
contamination. The presence of hazardous or toxic substances, or the failure to
remedy the situation properly, may also adversely affect the value of the
relevant property or the Group's ability to sell, let or regenerate that
property or to borrow using the property as security. The Group could be
required to remove or remediate any hazardous substances that it has caused or
knowingly permitted to be located at any property that it has owned or occupied
in the past or which it may own in the future.
The Group may be affected by political, legal and regulatory developments
Future political, legal or regulatory developments concerning the businesses of
the Group and the industry sectors in which they operate may affect their
ability to operate and trade profitably. Political risks include the imposition
of trade barriers, changes of regulatory developments and the volatility of
input costs, selling prices, taxes and currencies. Changes in the future could
have an adverse impact on the value of the Group's business, financial condition
or results of operations.
Changes in tax legislation may materially change the tax payable by the Group
The Group is exposed to financial risks from increases in tax rates and changes
in the basis of taxation, including corporation tax, National Insurance and VAT.
In particular, any increase in the rate of VAT could have an adverse effect on
the revenues and net operating profits of the Group's businesses. Provision has
been made in the financial statements for current and deferred taxation in
accordance with the Group's accounting policy on taxation which is summarised in
note 1. Should the amount of tax provided prove to be insufficient to meet
agreed or potential liabilities, further provision may be necessary, which would
reduce Equity Attributable to Shareholders.
Additional risks relating to Malmaison and Hotel du Vin
Malmaison and Hotel du Vin is susceptible to economic downturn in the hotel
industry and may be adversely affected by factors common to the hotel industry
Malmaison and Hotel du Vin's hotel revenue is dependent on the business, leisure
and tourist markets. Therefore, a downturn in these sectors could have a
material adverse effect on the revenues and profitability of Malmaison and Hotel
du Vin's hotels. Reductions in room rates and occupancy levels could have a
material adverse effect on Malmaison and Hotel du Vin's financial condition and
results of operations, and could reduce Malmaison and Hotel du Vin's income
available for distribution to its shareholders, principally MWB, and the value
of MWB's investment in Malmaison and Hotel du Vin.
The revenue receivable by Malmaison and Hotel du Vin could be adversely affected
by various operating risks common to the UK hotel industry, many of which are
beyond Malmaison and Hotel Du Vin's control, including the cyclical nature of
the hotel industry; a decrease in travel to and within the UK as a result of
adverse economic conditions; increases in fuel costs and other expenses which
may affect travel patterns and reduce the number of business and leisure and
tourist travellers; a decrease in travel to areas where Malmaison and Hotel du
Vin operates hotels caused by any epidemic or other disaster, natural or
otherwise; increasing threats of terrorism, terrorist events, airline strikes,
changes in airport security policies and other similar factors that may affect
travel patterns and reduce the number of business and commercial travellers and
tourists; and any other factors that may lead to reduced occupancy and room
rates.
Additional risks relating to Business Exchange
Business Exchange may suffer an increase in defaults affecting its financial
performance
The risk to Business Exchange arises principally from the Group's receivables
from customers. The demographics of the Group's customer base, including the
general default risk in the principal sectors in which the Group operates, have
less of an influence on credit risk. Geographically there is a concentration of
credit risk in London, where the Group has 45 serviced offices. Total revenue
in London was approximately GBP86.5 million for the year ended 31 December 2009.
The Group has established credit policies for dealing with new customers, their
creditworthiness, payment and delivery terms.
Reliance on key business centres and the London market
Business Exchange's portfolio is deliberately London biased as the Board
considers that this market shows the best demand characteristics for the service
provided by Business Exchange. The 45 London centres operated by Business
Exchange account for 66% of its total workstations and 77% of total revenue.
Dedicated marketing and sales resources are deployed to these key locations to
ensure occupancy and revenues are maintained, and to satisfy levels of existing
and prospective client demand. Business Exchange's buildings are well
maintained and are considered by the Board to be well protected against this
type of risk.
Reliance on key clients
MWB Business Exchange has concentrated on increasing the number of SMEs and
smaller corporate clients, thereby preventing a reliance on a small number of
larger clients. However, if Business Exchange were to lose one or more
significant clients which were not quickly replaced at a similar level of
REVPOW, revenue would be impacted. As a business strategy, the number of
clients who occupy more than 15% of any one business centre in the Group has
been significantly reduced in recent years. As a result, there are now only 44
clients out of approximately 2,000 who occupy such an amount, and no single
client occupies more than 2% of the entire portfolio.
Changes in the office market
If the conventional property market changes significantly and landlords offer
variations to existing leases such as shorter leases, more flexible lease terms,
giving significant rent reductions, or providing significant rent free periods,
the Group's business centres may become less attractive to both existing and
potential clients.
Long-term cost base does not match short-term revenue profile
MWB Business Exchange currently leases the majority of its properties; the
remainder are operated under management agreements. The length of the leases
and the time at which it may exercise any break option in such leases is nearly
always longer than the duration of the period of occupation by clients. If
revenues decline, Business Exchange may not be able to reduce significantly its
property related cost base throughout the remaining period of these leases.
Most of its business centres are profitable and the strong profitability of the
network largely negates this impact. Whilst Business Exchange cannot assign a
lease without landlord consent, it could sublet which would substantially reduce
the liability. Operating and Management Agreements and management contracts are
also used to mitigate the risk from leases as such agreements normally generate
a revenue stream to the Group regardless of occupancy and market conditions.
Additional risks relating to Liberty
The sector in which Liberty operates is highly competitive
The retail industry is highly competitive, particularly with respect to
merchandise selection and quality, store location and design, inventory, price,
customer service, credit availability and advertising. Liberty competes with a
wide variety of retailers of varying sizes covering different product
categories. Some of Liberty's competitors are general retailers that compete
with it in a number of product groups while others are specialist retailers that
compete with it only in certain product categories.
Liberty faces a variety of competitive challenges including anticipating and
quickly responding to changing consumer demands; maintaining favourable brand
recognition and effectively marketing its products to consumers in diverse
market segments; developing and sourcing innovative, high-quality fashion
products in styles that appeal to consumers of varying age groups and tastes;
sourcing merchandise efficiently; pricing its products competitively; and
changes in consumer behaviour and spending patterns, particularly as a result of
changes in general economic conditions.
Actions taken by Liberty's competitors, as well as actions taken by it to
maintain its competitiveness and reputation, have placed and will continue to
place pressure on its pricing strategy, margins and profitability. Some of
Liberty's competitors may have greater financial resources, greater purchasing
economies of scale and/or lower cost bases, any of which may give them a
competitive advantage over Liberty. These factors could have a material adverse
effect on Liberty's business, results of operations and financial condition.
Liberty could be adversely affected by changes in fashion trends
Liberty is dependent upon its ability to interpret and offer fashion products
that consumers wish to purchase. The availability of new products and changes in
customer preferences make it difficult to predict demand accurately. Liberty's
success depends, in part, on its ability to predict and respond to changing
consumer demands and preferences, and to translate market trends into
appropriate saleable merchandise offerings.
In some instances Liberty must enter into contracts for the purchase and
manufacture of merchandise well in advance of the applicable selling season. The
long lead times between ordering and delivery make it important to predict
accurately the demand for items. There can be no assurance that Liberty's orders
will match actual demand. If Liberty is unable to predict or respond to demand
or to changing styles or trends successfully, its revenue will be lower and it
may be forced to rely on additional markdowns or promotional sales to dispose of
excess or slow-moving inventory or it may experience inventory shortfalls on
popular merchandise. Any of these factors could have a material adverse effect
on its business, financial condition and results of operations.
In addition, Liberty's ability to anticipate and respond to changing customer
preferences and tastes depends, in part, on its ability to attract and retain
key personnel in its buying, design, merchandising, marketing and other
functions. There is competition for such personnel and Liberty may not be able
to attract and retain a sufficient number of qualified personnel in future
periods.
Any disruption or other adverse event affecting Liberty's relationship with any
of its major suppliers could adversely affect its business
Any significant disruption or adverse event affecting Liberty's relationship
with any of its major suppliers could have a material adverse affect on its
business, financial condition and results of operations. If Liberty needs to
replace any of its major suppliers, it may face risks and costs associated with
a transfer of operations. A failure to replace any of its major suppliers or
store card providers on commercially reasonable terms, or at all, could also
have a material adverse effect on Liberty's business, financial condition or
results of operations.
Liberty is susceptible to economic downturn in the retail industry and may be
adversely affected by factors common to the retail industry
Liberty's income is dependent to a large extent on the general economic
conditions prevailing at any given time and notably their impact on consumer
confidence and levels of discretionary expenditure. Economic downturns where
consumer confidence tends to be negatively impacted can have a material adverse
effect.
The revenue received by Liberty could be adversely affected by various operating
risks common to the UK retail industry, many of which are beyond Liberty's
control, including adverse seasonal weather conditions; a decrease in consumer
spending; a decrease in overseas travel to the UK as a result of the global
recession; a decrease in travel within Central London caused by any epidemic or
other disaster, natural or otherwise; increasing threats of terrorism, terrorist
events, airline strikes, changes in airport security policies, or factors that
affect travel patterns and reduce the number of customers visiting Liberty; and
increases in fuel costs and other expenses affecting travel, which may affect
travel patterns and reduce travel.
All of these factors could be exacerbated due to the seasonal nature of the UK
retail industry. Liberty's revenue is not equally weighted throughout the
calendar year. Historically, its most important trading period in terms of
revenue, operating results and cash flow has been the Christmas season, with
approximately 21% of annual revenue generated in the final six weeks of the
calendar year. If revenue during Liberty's peak seasons, particularly the
Christmas season, are significantly lower than it expects for any reason, it may
be left with a substantial amount of unsold inventory. In that event, Liberty
may be forced to rely on markdowns or promotional sales to dispose of excess
inventory, which could have a material adverse effect on its business, financial
condition and results of operations. At the same time, if it fails to purchase a
sufficient quantity of merchandise, it may not have an adequate supply of
products to meet consumer demand causing lost revenue and associated margins.
Liberty could face uninsured product liability claims
Liberty is potentially vulnerable to product liability claims and it could also
face liability and/or reputational damage relating to counterfeit products.
Defaults by concession partners could have an adverse impact on Liberty's
business
16% of Liberty's total revenue was derived from concessions during the year
ended 31 December 2009 (2008: 16%). Due to the current economic climate, some
concession operators within the industry have experienced disappointing
financial results. Defaults by Liberty's concession partners of the terms of
those concession partners' agreements with Liberty may have an adverse effect on
Liberty's business, financial condition and operating results.
Defaults by customers of Liberty's wholesale Art Fabrics business could have an
adverse impact on Liberty's business
Liberty of London's wholesale distribution business supplies Liberty Art Fabrics
to a number of wholesale customers. If customers of the wholesale business
default Liberty could suffer financial loss, which could have a material adverse
effect on Liberty's business, financial condition or results of operations.
The Liberty Pension Scheme's deficit could have an adverse impact on Liberty
The Liberty Pension Scheme, which is closed to new entrants, had a deficit of
GBP2.8m at 31 December 2009 under the basis of accounting required by
International Accounting Standard 19. The contributions made by Liberty during
the year ended 31 December 2009 amounted to GBP0.4m, of which GBP0.1m covers the
management and administration of the scheme and GBP0.3m is used to reduce the
funding deficit of the scheme. The level of deficit of the Liberty Pension
Scheme has fluctuated over the latest three years due to volatility in the
financial markets. If the value of the Liberty Pension Scheme assets were to
decline relative to its liabilities, the pension scheme would show an increased
deficit which would result in a reduction in Liberty's net asset value and/or
Liberty might be required to make additional contributions to cover this
shortfall. Any change in assumptions used to calculate the value of the Liberty
Pension Scheme's assets or liabilities could result in an increased deficit in
the scheme and/or Liberty being required to make additional contributions to the
Liberty Pension Scheme. If increased contributions were required, this would
have an adverse impact on cash flow and net worth of Liberty, with resultant
adverse effects on the cash flow and net worth of the Group.
Liberty may be adversely affected by foreign exchange fluctuations
Liberty settles a proportion of its merchandise purchases in foreign currency.
Liberty's business is therefore subject to risks due to fluctuations in currency
exchange rates. Liberty's currency hedging strategies may not adequately protect
its operating results from the effects of exchange rate fluctuations or may
limit any benefit that it might otherwise receive from favourable movements in
exchange rates. The results of Liberty's Japanese subsidiary in the Group's
consolidated results are affected by movement in the Sterling/Yen exchange rate
during any period and at the relevant period end. No specific hedging
instruments are deployed against dividend receipts in Yen from Liberty's
business in Japan.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2009
+--------------------------------+-------+----------------+------------+
| | | Year ended | Year ended |
| | | 31 December | 31 |
| | | 2009 | December |
| | | | 2008 |
+--------------------------------+-------+----------------+------------+
| |Notes | GBP'000 | GBP'000 |
+--------------------------------+-------+----------------+------------+
| Revenue | 2 | 284,299 | 277,876 |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Cost of sales | | (259,134) | (239,291) |
+--------------------------------+-------+----------------+------------+
| Gross profit | | 25,165 | 38,585 |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Administrative expenses | | (14,771) | (21,482) |
+--------------------------------+-------+----------------+------------+
| Net gain on sale of property, | | | |
| plant and | | | |
+--------------------------------+-------+----------------+------------+
| equipment | | - | 635 |
+--------------------------------+-------+----------------+------------+
| Net gain on lease surrender | | 85 | - |
+--------------------------------+-------+----------------+------------+
| Capital reorganisation costs | | - | (2,462) |
+--------------------------------+-------+----------------+------------+
| Results from operating | | 10,479 | 15,276 |
| activities | | | |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Finance income | 4 | 310 | 1,694 |
+--------------------------------+-------+----------------+------------+
| Finance expenses | 4 | (26,211) | (26,896) |
+--------------------------------+-------+----------------+------------+
| Loss before taxation | | (15,422) | (9,926) |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Taxation | 5 | (655) | 10,215 |
+--------------------------------+-------+----------------+------------+
| (Loss)/profit for the year | | (16,077) | 289 |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Attributable to: | | | |
+--------------------------------+-------+----------------+------------+
| Equity shareholders of the | | (15,948) | (2,718) |
| Company | | | |
+--------------------------------+-------+----------------+------------+
| Minority interests | 15 | (129) | 3,007 |
+--------------------------------+-------+----------------+------------+
| (Loss)/profit for the year | | (16,077) | 289 |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| | | | |
+--------------------------------+-------+----------------+------------+
| Loss per share (basic and | 6 | (22.0p) | (3.6p) |
| diluted) | | | |
+--------------------------------+-------+----------------+------------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
for the year ended 31 December 2009
+--------------------------------------------+------------+------------+
| | Year ended | Year ended |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+--------------------------------------------+------------+------------+
| (Loss)/profit for the year | (16,077) | 289 |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Other comprehensive income and expense for | | |
| the year | | |
+--------------------------------------------+------------+------------+
| net of tax: | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Foreign exchange translation differences | | |
| for foreign | | |
+--------------------------------------------+------------+------------+
| operations | (222) | 1,076 |
+--------------------------------------------+------------+------------+
| Revaluation of property, plant and | (2,141) | (79,231) |
| equipment | | |
+--------------------------------------------+------------+------------+
| Effective portion of changes in fair value | | |
| of cash flow | | |
+--------------------------------------------+------------+------------+
| hedges | (3,290) | (2,243) |
+--------------------------------------------+------------+------------+
| Defined benefit pension scheme actuarial | (995) | (2,019) |
| losses | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Other comprehensive loss for the year net | (6,648) | (82,417) |
| of tax | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Total comprehensive income and expense for | (22,725) | (82,128) |
| the year | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Attributable to: | | |
+--------------------------------------------+------------+------------+
| Equity shareholders of the Company | (21,394) | (70,089) |
+--------------------------------------------+------------+------------+
| Minority interests | (1,331) | (12,039) |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| | | |
+--------------------------------------------+------------+------------+
| Total comprehensive income and expense for | (22,725) | (82,128) |
| the year | | |
+--------------------------------------------+------------+------------+
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2009
+------------------------------------------+-------+-----------+-----------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+------------------------------------------+-------+-----------+-----------+
| |Notes | GBP'000 | GBP'000 |
+------------------------------------------+-------+-----------+-----------+
| Non-current assets | | | |
+------------------------------------------+-------+-----------+-----------+
| Intangible assets and goodwill | 7 | 28,794 | 25,969 |
+------------------------------------------+-------+-----------+-----------+
| Operational properties | 8 | 499,414 | 502,644 |
+------------------------------------------+-------+-----------+-----------+
| Operational properties in the course of | 8 | 1,929 | 1,691 |
| construction | | | |
+------------------------------------------+-------+-----------+-----------+
| Plant and equipment | 8 | 58,123 | 61,597 |
+------------------------------------------+-------+-----------+-----------+
| Deferred tax asset | 14 | 10,542 | 10,500 |
+------------------------------------------+-------+-----------+-----------+
| Financial instruments | 13 | - | 341 |
+------------------------------------------+-------+-----------+-----------+
| | | 598,802 | 602,742 |
+------------------------------------------+-------+-----------+-----------+
| Current assets | | | |
+------------------------------------------+-------+-----------+-----------+
| Inventories | | 14,306 | 11,705 |
+------------------------------------------+-------+-----------+-----------+
| Trade and other receivables: | | | |
+------------------------------------------+-------+-----------+-----------+
| Due after more than one year | 9 | 2,569 | 2,660 |
+------------------------------------------+-------+-----------+-----------+
| Due within one year | 9 | 31,844 | 35,677 |
+------------------------------------------+-------+-----------+-----------+
| Cash and cash equivalents | 10 | 19,655 | 32,064 |
+------------------------------------------+-------+-----------+-----------+
| | | 68,374 | 82,106 |
+------------------------------------------+-------+-----------+-----------+
| Total assets | | 667,176 | 684,848 |
+------------------------------------------+-------+-----------+-----------+
| Current liabilities | | | |
+------------------------------------------+-------+-----------+-----------+
| Bank overdrafts | 10 | - | (28) |
+------------------------------------------+-------+-----------+-----------+
| Loans and borrowings | 11 | (11,424) | (342,632) |
+------------------------------------------+-------+-----------+-----------+
| Derivative financial instruments | 13 | (5,526) | (2,235) |
+------------------------------------------+-------+-----------+-----------+
| Trade and other payables | 12 | (86,988) | (74,324) |
+------------------------------------------+-------+-----------+-----------+
| Tax payable | | (393) | (157) |
+------------------------------------------+-------+-----------+-----------+
| | | (104,331) | (419,376) |
+------------------------------------------+-------+-----------+-----------+
| Non-current liabilities | | | |
+------------------------------------------+-------+-----------+-----------+
| Loans and borrowings | 11 | (364,580) | (44,561) |
+------------------------------------------+-------+-----------+-----------+
| Employee benefits | | (2,814) | (2,066) |
+------------------------------------------+-------+-----------+-----------+
| Trade and other payables | 12 | (19,202) | (15,046) |
+------------------------------------------+-------+-----------+-----------+
| | | (386,596) | (61,673) |
+------------------------------------------+-------+-----------+-----------+
| Total liabilities | | (490,927) | (481,049) |
+------------------------------------------+-------+-----------+-----------+
| Net assets | | 176,249 | 203,799 |
+------------------------------------------+-------+-----------+-----------+
| | | | |
+------------------------------------------+-------+-----------+-----------+
| | | | |
+------------------------------------------+-------+-----------+-----------+
| Equity | | | |
+------------------------------------------+-------+-----------+-----------+
| Share capital | | 217 | 217 |
+------------------------------------------+-------+-----------+-----------+
| Other reserves | | 125,715 | 131,152 |
+------------------------------------------+-------+-----------+-----------+
| Retained earnings | | (21,396) | (5,488) |
+------------------------------------------+-------+-----------+-----------+
| | | | |
+------------------------------------------+-------+-----------+-----------+
| Total equity attributable to | 16 | 104,536 | 125,881 |
| shareholders of the Company | | | |
+------------------------------------------+-------+-----------+-----------+
| Minority interests | 15 | 71,713 | 77,918 |
+------------------------------------------+-------+-----------+-----------+
| Total equity | | 176,249 | 203,799 |
+------------------------------------------+-------+-----------+-----------+
| | | | |
+------------------------------------------+-------+-----------+-----------+
| Equity attributable to shareholders of | | | |
| the Company | | | |
+------------------------------------------+-------+-----------+-----------+
| in pence per share | 16 | 144p | 174p |
+------------------------------------------+-------+-----------+-----------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| | Share | Capital | Revaluation | Hedging | Translation |
| | capital | redemption | reserve | reserve | reserve |
| | | reserve | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Year ended 31 December 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| At 1 January 2009 | 217 | 25 | 121,234 | (1,845) | 794 |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Total comprehensive income for the year: | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Loss for the year | - | - | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Revaluation of property, plant and equipment | - | - | (1,901) | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Defined benefit pension scheme actuarial loss | - | - | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Effective portion of changes in fair value of | - | - | - | (2,713) | - |
| cash flow hedges | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Transfer of depreciation on revalued properties | - | - | (671) | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Foreign exchange translation differences for | - | - | | | (152) |
| foreign operations | | | - | - | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Total comprehensive income for the year | - | - | (2,572) | (2,713) | (152) |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Transactions with owners recorded directly in | | | | | |
| equity | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Contributions by and distributions to owners | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Dividend paid to external shareholders of MWB | - | - | - | - | - |
| Business Exchange Plc | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Transfer on increase in minority interests in | | | | | |
| MWB Malmaison Holdings Ltd | | | | | |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| and MWB Business Exchange Plc | - | - | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Payment to minority | - | - | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Issue and purchase of Ordinary Shares | - | - | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Write back of option cost through equity | - | - | | | |
| | | | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Total transactions with owners | - | - | | | |
| | | | - | - | - |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
| Share capital and reserves at 31 December 2009 | 217 | 25* | 118,662* | (4,558)* | 642* |
+--------------------------------------------------+----------+------------+-------------+----------+-------------+
* = Disclosed as 'Other reserves' at 31 December 2009 totalling GBP125,715,000
in the Consolidated Statement of Financial Position.
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| | Merger | Other | Retained | Total | Minority | Total |
| | reserve | reserve | earnings | equity | interests | equity |
| | | | | attributable | | |
| | | | | to | | |
| | | | | shareholders | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Year ended 31 December 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| At 1 January 2009 | 9,161 | 1,783 | (5,488) | 125,881 | 77,918 | 203,799 |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Total comprehensive income for the year: | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Loss for the year | - | - | (15,948) | (15,948) | (129) | (16,077) |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Revaluation of property, plant and equipment | - | - | - | (1,901) | (240) | (2,141) |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Defined benefit pension scheme actuarial loss | - | - | (680) | (680) | (315) | (995) |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Effective portion of changes in fair value of | - | - | - | (2,713) | (577) | (3,290) |
| cash flow hedges | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Transfer of depreciation on revalued properties | - | - | 671 | - | - | - |
| | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Foreign exchange translation differences for | | | | (152) | (70) | (222) |
| foreign operations | - | - | - | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Total comprehensive income for the year | | | (15,957) | (21,394) | (1,331) | (22,725) |
| | - | - | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Transactions with owners recorded directly in | | | | | | |
| equity | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Contributions by and distributions to owners | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Dividend paid to external shareholders of MWB | - | - | (2,803) | (2,803) | - | (2,803) |
| Business Exchange Plc | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Transfer on increase in minority interests in | | | | | | |
| Malmaison Holdings Ltd | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| and MWB Business Exchange Plc | - | - | 4,226 | 4,226 | (4,226) | - |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Payment to minority | - | - | - | - | (117) | (117) |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Issue and purchase of Ordinary Shares | - | - | (1,701) | (1,701) | (678) | (2,379) |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Write back of option cost through equity | | | 327 | 327 | 147 | 474 |
| | - | - | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Total transactions with owners | | | 49 | 49 | (4,874) | (4,825) |
| | - | - | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Share capital and reserves at 31 December 2009 | 9,161* | 1,783* | (21,396) | 104,536 | 71,713 | 176,249 |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
| Retained earnings at 31 December 2009 comprise | | | | | | |
| the following:- | | | | | | |
+-------------------------------------------------+---------+---------+------------+--------------+-------------+-------------+
+------------------------------------------------------------------+------------+
| Scheme of Arrangement April 2008 | (10,396) |
+------------------------------------------------------------------+------------+
| Increase in retained earnings due to capital reduction | 160,883 |
+------------------------------------------------------------------+------------+
| Accumulated net loss in Consolidated Income Statements to 31 | (91,468) |
| December 2009 | |
+------------------------------------------------------------------+------------+
| Purchase by the Company of its own ordinary shares and Units | (80,415) |
| that have subsequently been cancelled | |
+------------------------------------------------------------------+------------+
| Retained earnings at 31 December 2009 | (21,396) |
+------------------------------------------------------------------+------------+
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| | Share | Share | Capital | Revaluation | Hedging | Translation |
| | capital | premium | redemption | reserve | reserve | reserve |
| | | | reserve | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Year ended 31 December 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| At 1 January 2008 | 40,261 | 79,563 | 30,663 | 187,151 | 5 | 69 |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Scheme of Arrangement April 2008 | 120,864 | (79,563) | (30,663) | | | |
| | | | | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| At 1 January 2008 restated for effect of Scheme | 161,125 | - | - | 187,151 | 5 | 69 |
| of Arrangement | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Total comprehensive income for the year: | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Profit for the year | - | - | - | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Revaluation of property, plant and equipment | - | - | - | (64,867) | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Defined benefit pension scheme actuarial loss | - | - | - | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Effective portion of changes in fair value of | - | - | - | - | (1,850) | - |
| cash flow hedges | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Transfer of depreciation on revalued properties | - | - | - | (1,050) | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Foreign exchange translation differences for | | | | | | 725 |
| foreign operations | - | - | - | - | - | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Total comprehensive income for the year | | | | (65,917) | (1,850) | 725 |
| | - | - | - | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Transactions with owners recorded directly in | | | | | | |
| equity | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Contributions by and distributions to owners | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Capital reduction | (160,883) | - | - | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Dividend paid to external shareholders of MWB | - | - | - | - | - | - |
| Business Exchange Plc | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Transfer on increase in minority interests in | | | | | | |
| MWB Malmaison Holdings Ltd | | | | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| and MWB Business Exchange Plc | - | - | - | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Issue and purchase of Ordinary Shares | (25) | - | 25 | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Write back of option cost through equity | | | | | | |
| | - | - | - | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Total transactions with owners | (160,908) | | 25 | | | |
| | | - | | - | - | - |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
| Share capital and reserves at 31 December 2008 | 217 | | | 121,234* | (1,845)* | 794* |
| | | - | 25* | | | |
+--------------------------------------------------+-------------+----------+------------+-------------+-----------+-------------+
* = Disclosed as 'Other reserves' at 31 December 2008 totalling GBP131,152,000
in the Consolidated Statement of Financial Position.
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| | Merger | Other | Retained | Total | Minority | Total |
| | reserve | reserve | earnings | equity | interests | equity |
| | | | | attributable | | |
| | | | | to | | |
| | | | | shareholders | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Year ended 31 December 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| At 1 January 2008 | 9,403 | 1,783 | (144,521) | 204,377 | 91,783 | 296,160 |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Scheme of Arrangement April 2008 | (242) | | (10,396) | | | |
| | | - | | - | - | - |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| At 1 January 2008 restated for effect of Scheme | 9,161 | 1,783 | (154,917) | 204,377 | 91,783 | 296,160 |
| of Arrangement | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Total comprehensive income for the year: | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Profit for the year | - | - | (2,718) | (2,718) | 3,007 | 289 |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Revaluation of property, plant and equipment | - | - | - | (64,867) | (14,364) | (79,231) |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Defined benefit pension scheme actuarial loss | - | - | (1,379) | (1,379) | (640) | (2,019) |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Effective portion of changes in fair value of | - | - | - | (1,850) | (393) | (2,243) |
| cash flow hedges | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Transfer of depreciation on revalued properties | - | - | 1,050 | - | - | - |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Foreign exchange translation differences for | | | | 725 | 351 | 1,076 |
| foreign operations | - | - | - | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Total comprehensive income for the year | | | (3,047) | (70,089) | (12,039) | (82.128) |
| | - | - | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Transactions with owners recorded directly in | | | | | | |
| equity | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Contributions by and distributions to owners | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Capital reduction | - | - | 160,883 | - | - | - |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Dividend paid to external shareholders of MWB | - | - | (427) | (427) | - | (427) |
| Business Exchange Plc | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Transfer on increase in minority interests in | | | | | | |
| MWB Malmaison | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Holdings Ltd and MWB Business Exchange Plc | - | - | 1,809 | 1,809 | (1,809) | - |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Issue and purchase of ordinary shares | - | - | (9,987) | (9,987) | (91) | (10,078) |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Write back of option cost through equity | | | 198 | 198 | 74 | 272 |
| | - | - | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Total transactions with owners | | | 152,476 | (8,407) | (1,826) | (10,233) |
| | - | - | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Share capital and reserves at 31 December 2008 | | | (5,488) | 125,881 | 77,918 | 203,799 |
| | 9,161* | 1,783* | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
| Retained earnings at 31 December 2008 comprise | | | | | | |
| the following:- | | | | | | |
+--------------------------------------------------+------------+---------+-------------+--------------+-------------+-------------+
+--------------------------------------------------------------------+-------------+
| Scheme of Arrangement April 2008 | (10,396) |
+--------------------------------------------------------------------+-------------+
| Increase in retained earnings due to capital reduction | 160,883 |
+--------------------------------------------------------------------+-------------+
| Accumulated net loss in Consolidated Income Statements to 31 | (75,560) |
| December 2008 | |
+--------------------------------------------------------------------+-------------+
| Purchase by the Company of its own ordinary shares and Units that | (80,415) |
| have subsequently been cancelled | |
+--------------------------------------------------------------------+-------------+
| Retained earnings at 31 December 2008 | (5,488) |
+--------------------------------------------------------------------+-------------+
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2009
+------------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+----------+----------+
| (Loss)/profit for the year | (16,077) | 289 |
+------------------------------------------------+----------+----------+
| Adjustments | | |
+------------------------------------------------+----------+----------+
| Taxation | 655 | (10,215) |
+------------------------------------------------+----------+----------+
| Finance income | (310) | (1,694) |
+------------------------------------------------+----------+----------+
| Finance expenses | 26,211 | 26,896 |
+------------------------------------------------+----------+----------+
| Gain on sale of property, plant and equipment | - | (635) |
+------------------------------------------------+----------+----------+
| Depreciation of property, plant and equipment | 17,809 | 15,840 |
+------------------------------------------------+----------+----------+
| Currency translation differences | 110 | 148 |
+------------------------------------------------+----------+----------+
| Equity settled share-based payment | 474 | 272 |
| transactions | | |
+------------------------------------------------+----------+----------+
| Cash flows from operations before changes in | 28,872 | 30,901 |
| working capital | | |
+------------------------------------------------+----------+----------+
| Change in inventories | (2,601) | (2,216) |
+------------------------------------------------+----------+----------+
| Change in trade and other receivables | 4,150 | 4,252 |
+------------------------------------------------+----------+----------+
| Change in trade and other payables | 14,713 | 9,640 |
+------------------------------------------------+----------+----------+
| Change in provisions and employee benefits | 748 | 1,650 |
+------------------------------------------------+----------+----------+
| Cash generated from operations | 45,882 | 44,227 |
+------------------------------------------------+----------+----------+
| Interest paid | (26,345) | (29,445) |
+------------------------------------------------+----------+----------+
| Tax paid | (461) | (488) |
+------------------------------------------------+----------+----------+
| Net cash from operating activities | 19,076 | 14,294 |
+------------------------------------------------+----------+----------+
| Cash flows from investing activities | | |
+------------------------------------------------+----------+----------+
| Interest received | 310 | 1,674 |
+------------------------------------------------+----------+----------+
| Proceeds from sale of property, plant and | - | 1,091 |
| equipment | | |
+------------------------------------------------+----------+----------+
| Acquisition of business - goodwill | (2,138) | - |
+------------------------------------------------+----------+----------+
| Purchase of property, plant and equipment | (13,333) | (54,402) |
+------------------------------------------------+----------+----------+
| Net cash used in investing activities | (15,161) | (51,637) |
+------------------------------------------------+----------+----------+
| Cash flows from financing activities | | |
+------------------------------------------------+----------+----------+
| Purchase of own shares, inclusive of costs | (2,379) | (10,078) |
+------------------------------------------------+----------+----------+
| Proceeds from draw down of borrowings | 4,069 | 74,232 |
+------------------------------------------------+----------+----------+
| Borrowings repaid | (15,258) | (17,233) |
+------------------------------------------------+----------+----------+
| Increase in hire purchase and leasing | 192 | - |
| contracts | | |
+------------------------------------------------+----------+----------+
| Payments to minority interests | (2,920) | (427) |
+------------------------------------------------+----------+----------+
| Net cash (used in)/from financing activities | (16,296) | 46,494 |
+------------------------------------------------+----------+----------+
| Net (decrease)/increase in cash and cash | (12,381) | 9,151 |
| equivalents | | |
+------------------------------------------------+----------+----------+
| Opening cash and cash equivalents | 32,036 | 22,885 |
+------------------------------------------------+----------+----------+
| Closing cash and cash equivalents (note 10) | 19,655 | 32,036 |
+------------------------------------------------+----------+----------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES FOR GROUP FINANCIAL STATEMENTS
Basis of preparation
MWB Group Holdings Plc is a company incorporated and domiciled in the United
Kingdom. The address of the Company's registered office is 30 City Road, London
EC1Y 2AG. The consolidated financial statements of the Company for the year
ended 31 December 2009 comprise the Company and the subsidiaries (together
referred to as the "Group"). The consolidated financial statements for the year
ended 31 December 2009 have been prepared in accordance with International
Financial Reporting Standards as adopted by the EU ("Adopted IFRS"). The
Company has elected to prepare its Parent Company financial statements in
accordance with UK GAAP.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements and have been applied consistently by Group entities.
The results of the Group for the year ended 31 December 2009 incorporate the
results of the Company and its subsidiary undertakings for the period then
ended. The results have been prepared on the basis of the accounting policies
adopted in the financial statements of MWB Group Holdings Plc and its subsidiary
companies for the year ended 31 December 2009, which comprised the Group at the
previous year end. These policies have been applied consistently in all
material respects in the preparation of these results.
The financial statements have been prepared on a going concern basis, which
assumes that the Group will be able to meet its liabilities as they fall due for
the foreseeable future. The Group is dependent for its working capital
requirements on cash generated from operations, cash holdings of GBP19.7m at 31
December 2009, bank facilities totalling GBP360m (of which GBP349m was drawn at
31 December 2009), Unsecured Loan Stock of GBP30m and a bank overdraft of GBP1m
(which was undrawn at 31 December 2009). Other than the overdraft which is due
for renewal on 1 September 2010, the remaining bank facilities run until 31
December 2011. The Unsecured Loan Stock is redeemable at the Company's option
at any time between June 2009 and June 2012 and no later than 30 June 2012. The
Directors have prepared cash flow projections for the period to 30 June 2011
('the Projections') which are based on certain assumptions. The resultant cash
flow projections show that the Group is capable of operating within the
financing arrangements referred to above and meeting the financial covenant
tests in relation to all loans drawn included in these arrangements throughout
the period covered by the Projections.
The Directors recognise that in the current economic environment, risks may
exist regarding future property values and the achievability of projected
occupancy levels, room rates and margins in Malmaison and Hotel du Vin;
projected occupancy levels and workstation rates in Business Exchange, and
projected sales and margins at Liberty.
In evaluating the going concern assumption, the Directors have taken into
account various uncertainties including the following:
The Group is required to comply with a number of covenants in the Company's
Articles of Association, in its bank facilities and in the loan stock deed, the
principal ones of which are summarised in note 11"Loans and Borrowings" to the
financial statements. All of these covenants were fully complied with for all
loans drawn at 31 December 2009 and are forecast to be fully complied with for
all loans drawn during the period covered by the Projections. The Directors are
aware that compliance with these covenants could be affected if there are
continued reductions in property values or significantly adverse trading
conditions. The Directors continue to monitor adherence to these covenants
carefully and to ensure adherence at all times.
In order to increase headroom and flexibility in relation to the banking
covenants and ongoing funding requirements, on 11 January 2010 the Company
successfully raised GBP27.5m through the Placing detailed more fully in note 18
"Post Balance Sheet Event". At the same time that these monies were raised the
Company also obtained an easing in the Loan Stock covenant such that the net
debt attributable to shareholders' threshold was raised from four to five times
adjusted shareholders' funds.
The Liberty and Malmaison and Hotel du Vin divisions are forecast to draw their
available bank facilities during the term covered by the Projections in
accordance with their Business Plans. Both divisions are forecast to fully
comply with these covenants during the period covered by the Projections. The
Directors have tested the impact of variations from the Projections on the
ability of these divisions to operate within the financial covenants and their
available cash resources, to reflect reasonably possible downside risks to the
assumptions contained within the Projections. In such downside scenarios, the
ability of the divisions to continue to operate within the facilities available
without further recourse to MWB beyond commitments already made, and maintaining
compliance with the financial covenants, would be dependent on implementing
various cost saving initiatives and mitigating actions within the timescales
required. These cost saving initiatives and mitigating actions are all under
the control of the Group and the Directors consider they would be implemented as
required.
The Group receives dividends from its 71.5% owned subsidiary MWB Business
Exchange and these along with other financial resource in the Group are used to
fund cash requirements elsewhere in the Group. The forecasts show that MWB
Business Exchange will have sufficient cash reserves and distributable profits
to pay the dividends required.
After making enquiries, and after considering the above, the Directors have a
reasonable expectation that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. For these
reasons, the Directors consider it appropriate to prepare the financial
statements on a going concern basis.
The consolidated financial statements are prepared on the historical cost basis
except that the following assets and liabilities are stated at their fair value:
- Operational properties; and
- Derivative financial instruments.
These consolidated financial statements are presented in UK Sterling, which is
the Company's functional currency. All financial information has been rounded
to the nearest thousand pounds.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future
periods affected.
In particular, information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies that have the most
significant effect on the amount recognised in the financial statements relate
to:
- the assumptions used to measure defined benefit obligations
- the assumptions used to assess deferred tax
- the assumptions used to assess value in use for impairment testing
of the Group's brands and goodwill
- the valuation of the Group's properties
- the assumptions used to assess the carrying value of receivables
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the
Group has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that are currently exercisable or
convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. Dilution gains and losses on increases in minority interests,
where no change of control results, are recognised directly in equity. Where
necessary, accounting policies of subsidiaries are changed on acquisition to
align them with the policies adopted by the Group.
Intra-group balances and transactions and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of
cost of acquisition over the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired
company. When the excess is negative it is recognised immediately in the Income
Statement. Goodwill is carried at cost less any recognised impairment losses
that arise from annual assessments of its carrying value.
Brands
Brands acquired by the Group are included in the financial statements at their
cost less impairment. 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 brands have not been
amortised but have instead been subject to an impairment assessment conducted at
each financial year end. Where this reveals a surplus, the value of the brand
is retained, where it reveals a deficit, the brand is written down and the
deficit is charged to the Income Statement. Subsequent expenditure on brands is
recognised in the Income Statement when incurred.
Property, plant and equipment
Operational properties are land and buildings held for use in the production or
supply of goods or services, or for administrative purposes, and are stated in
the balance sheet at their revalued amounts, being the fair value, determined
from market-based evidence and appraisals undertaken by professional valuers at
the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings
is credited to the revaluation reserve within equity, except to the extent that
it reverses a revaluation decrease for the same asset previously recognised as
an expense, in which case the increase is credited to the Income Statement to
the extent of the decrease previously charged. A decrease in carrying amount
arising on the revaluation of such land and buildings is charged as an expense
in the Income Statement to the extent that it exceeds the balance, if any, held
in the revaluation reserve relating to previous revaluations of that asset.
Operational properties in the course of construction are measured at cost less
any impairment losses.
The cost of self constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the asset to a working
condition for its intended use and the costs of dismantling and removing any
items and of restoring the site on which they were located. Borrowing costs
related to the construction of qualifying assets are capitalised. Operational
properties in the course of construction are considered complete when they are
capable of generating income and the development is complete. At that point
they are re-measured to fair value and any gain or loss on re-measurement is
recognised in the revaluation reserve.
Leasehold improvements are measured at cost less accumulated depreciation and
any impairment losses. Cost includes expenditure that is directly attributable
to the acquisition of an asset and includes professional fees and, for
qualifying assets, capitalised borrowing costs.
The gain or loss on disposal or derecognition of property, plant and equipment
is determined by comparing the sale proceeds with the carrying amount of the
asset at the date of disposal or retirement, and is recognised in the Income
Statement. When revalued assets are sold, the amounts included in the
revaluation reserve relating to those assets are transferred directly to
retained earnings.
Depreciation of properties in the course of construction is provided on the same
basis as other property assets, in that it commences when the assets are ready
for their intended use. Depreciation is charged so as to write off the cost or
valuation of property, plant and equipment, other than land and property under
construction and less residual amounts, using the straight line method, over
their following estimated useful lives:-
+------------------------------------+--+-------------------------------+
| Freehold and long leasehold listed | | The shorter of 100 years and |
| operational properties | | the term of the lease |
+------------------------------------+--+-------------------------------+
| | | |
+------------------------------------+--+-------------------------------+
| Other freehold and long leasehold | | 50 years |
| operational properties | | |
+------------------------------------+--+-------------------------------+
| | | |
+------------------------------------+--+-------------------------------+
| Leasehold improvements | | The shorter of 50 years and |
| | | the term of the lease |
+------------------------------------+--+-------------------------------+
| | | |
+------------------------------------+--+-------------------------------+
| Building surface finishes and | | The shorter of 30 years and |
| services | | the term of the lease |
+------------------------------------+--+-------------------------------+
| | | |
+------------------------------------+--+-------------------------------+
| Plant and machinery | | 15 to 20 years |
+------------------------------------+--+-------------------------------+
| | | |
+------------------------------------+--+-------------------------------+
| Fixtures and equipment | | 3 to 10 years |
+------------------------------------+--+-------------------------------+
Freehold land is not depreciated.
Leased assets
Leases would be classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Assets held under operating leases are not recognised as assets of the Group.
Rentals payable and incentives received under operating leases are recognised in
the Income Statement on a straight-line basis over the term of the lease.
Lease incentives
Lease incentives, such as rent free periods received or granted, are amortised
on a straight-line basis over the non-cancellable period of the lease.
Impairment
The carrying amounts of the Group's non-financial assets, inventories and
deferred tax assets, are reviewed at each balance sheet date to determine
whether there is any objective evidence of impairment. If any indication
exists, the asset's recoverable amount is estimated. For goodwill and
intangible assets that have an indefinite useful life, the recoverable amount is
estimated at each balance sheet date.
The recoverable amount of an asset or cash generating unit is the greater of its
value in use and its fair value, less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a
pre-discount rate that reflects current market assessments of the time value of
money, and the risks specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the "cash generating unit").
For the purpose of impairment testing, the goodwill acquired in a business
combination is allocated to cash-generating units that are expected to benefit
from the synergies of the combination.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the Income Statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the units and then to reduce the carrying amount of other
assets in the unit on a pro-rata basis.
Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is
based on the first in, first out, principle and comprises direct materials and,
where applicable, direct labour costs and those overheads that have been
incurred in bringing inventories to their existing location and condition. Net
realisable value represents the estimated selling price less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on transactions are recognised in the Income Statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at foreign exchange
rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated at foreign exchange
rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated at an average rate for the period where this rate
approximates to the foreign exchange rates ruling at the dates of the
transactions.
Exchange differences arising from the translation of foreign operations, and of
related qualifying hedges, are taken directly to the translation reserve. They
are released into the Income Statement upon disposal.
Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value.
Subsequent to initial recognition, non-derivative financial instruments are
measured at amortised cost using the effective interest method, less any
impairment losses.
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose only of the statement of cash flows.
Interest bearing bank loans and overdrafts and the Group's unsecured loan stock
are initially recorded at fair value. The net amount of any premium or discount
over the nominal value, less issue costs, is amortised over the life of the
instrument via the effective interest method over its life and charged or
credited to interest payable in the Income Statement.
Ordinary share capital is classified as equity. Incremental costs directly
attributable to the issue of Ordinary Shares and share options are recognised as
a deduction from equity, net of any tax effects. When share capital recognised
as equity is purchased by the Company, the amount of consideration paid
including directly attributable costs, net of any tax effects, is recognised as
a deduction from total equity.
The Group's activities expose it primarily to the financial risk of changes in
interest rates and foreign currency exchange rates on its overseas business.
The Group uses interest rate swaps, swaptions, caps, floors and collars to hedge
these exposures. The Group does not use derivative instruments for speculative
purposes.
Derivatives are recognised initially at fair value; attributable transaction
costs are recognised in the Income Statement as incurred. Subsequent to initial
recognition, derivatives are measured at fair value.
Changes in the fair value of derivative financial instruments that are
designated and effective as cash flow hedges are recognised directly in equity
to the extent that the hedge is effective. To the extent that the hedge is
ineffective, changes in fair value are recognised in the Income Statement. If
the cash flow hedge of a firm commitment or a forecast transaction results in
the recognition of an asset or a liability, then, at the time the asset or
liability is recognised, the associated gains or losses on the derivative that
had previously been recognised in equity are included in the initial measurement
of the asset or liability. For hedges that do not result in the recognition of
an asset or a liability, amounts deferred in equity are recognised in the Income
Statement in the same period in which the hedged item affects net income.
Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the Income Statement as they
arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated, exercised or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss previously recognised in equity is retained in
equity until the forecast transaction occurs. When the hedged item is a
non-financial asset, the amount recognised in equity is transferred to the
carrying amount of the asset when it is recognised. In other cases, the amount
recognised in equity is transferred to the Income Statement in the period that
the hedged item is recognised.
The fair value of forward exchange contracts is based on their listed market
price, if available. If a listed price is not available, then fair value is
estimated by discounting the difference between the contractual forward price
and the current forward price for the residual maturity of the contract, using a
risk-free interest rate based on Government bonds.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Obligations for contributions to defined contribution
pension schemes are recognised as an expense in the Income Statement as
incurred.
The Group's net obligation in respect of defined benefit pension schemes is
calculated separately for each scheme by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value at the date
of the financial statements. Any unrecognised past service costs and the fair
value of any scheme assets is deducted in calculating the Group's net obligation
to the scheme for the retirement benefits to be provided. The discount rate
used is the yield at the balance sheet date on AA credit rated bonds that have
maturity dates approximating to the term of the Group's obligations under the
scheme, and which are denominated in the same currency in which the benefits are
expected to be paid. When the calculation results in a benefit to the Group,
the recognised asset is limited to the net total of any unrecognised past
service costs and the present value of any future refunds from the scheme or
reductions in future contributions to the scheme.
When the benefits of a scheme are improved, the portion of the increased benefit
relating to past service by employees is recognised as an expense in the Income
Statement on a straight-line basis over the average period until the benefits
become vested. To the extent that the benefits vest immediately, the expense is
recognised immediately in the Income Statement.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable.
In the Group's hotel operations, revenue principally comprises invoices issued
to customers during the period for accommodation and services provided. In the
Group's serviced office operations, revenue principally comprises licence fees
billed to clients, rentals charged and service charges invoiced to licencees.
In Liberty Plc, revenue principally comprises amounts receivable for goods and
services provided in the normal course of business, net of staff discounts and
the costs of loyalty scheme rewards. Revenue from store sales of goods, and
commission on concession sales, are recognised when goods are sold to the
customer. Internet and fabric sales are recognised when the goods are delivered
to the customer.
Interest income is accrued on a time basis by reference to the principal
outstanding and at the effective interest rate applicable.
In all instances, revenue is shown net of discounts and VAT.
Cost of sales
Cost of sales comprises the book value of disposals of trading properties and
developments in progress, together with the direct costs incurred in managing
and operating the Group's property and operational activities.
Share-based payment transactions
The share option programme allows certain employees to acquire shares in its
listed subsidiaries; these awards are granted by the listed subsidiaries
concerned.
For equity-settled share based payments, the fair value of options granted to
employees is recognised as an employee expense, with a corresponding increase in
equity, over the period in which the employees become unconditionally entitled
to the options. The fair value of the options granted is measured using an
option valuation model, taking into account the terms and conditions upon which
the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that vest except where forfeiture is
due only to share prices not achieving the threshold for vesting.
For cash-settled share based payments, the fair value of amounts payable to
employees is recognised as an expense with a corresponding increase in
liabilities over the period that employees become entitled to payment. The
liability is remeasured at each reporting date and at settlement date. Any
changes in the fair value of the liability are recognised as a payroll cost in
the Income Statement. The cash-settled share based payments only relate to
employees of certain subsidiaries and do not involve employees or Directors of
MWB Group Holdings Plc.
Dividends
Dividends that have been approved by shareholders at previous Annual General
Meetings are included within liabilities. Dividends proposed at the balance
sheet date that are subject to approval by shareholders at the annual general
meeting are not included as a liability in the current period's financial
statements.
Finance income and expense
Finance income comprises interest received or receivable on funds invested.
Interest income is recognised in the Income Statement as it accrues, using the
effective interest method. Dividend income is recognised in the Income
Statement on the date the Group entity's right to receive the income is
established.
Finance expenses comprise interest paid or payable and finance charges on
finance leases that are recognised in the Income Statement. Interest incurred
on loans specific to properties in the course of development is capitalised
during the development phase but ceases to be capitalised once the development
is completed and ready for occupation. Where such interest is allowable in
computing the taxation liabilities of the Group, this is used to reduce the tax
charge in the Income Statement.
Taxation
The income tax expense in the Consolidated Income Statement comprises current
and deferred tax. Income tax expense is recognised the Consolidated Income
Statement except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years. Any additional income
taxes which arise from the distribution of dividends are recognised at the same
time as the liability to pay the related dividend is recognised.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or
loss, and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not reverse
in the foreseeable future. In addition, deferred tax is not recognised for
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted at the reporting date. Deferred tax assets and
liabilities are only offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities
but they intend to settle current tax liabilities and assets on a net basis, or
their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
New standards and interpretations adopted for the first time
A number of new standards, amendments to standards and interpretations have been
issued which are effective for the financial year ended 31 December 2009.
Accordingly, they have been applied in preparing these financial statements.
The standards and amendments to standards and interpretations that have become
effective are as follows:-
IFRIC 14: The Group has assessed the impact of IFRIC 14 - IAS 19. This relates
to the limit on a defined benefit asset, minimum funding requirements and their
interaction at 31 December 2009. IFRIC 14 provides additional guidance on
assessing the amount that can be recognised as an asset of a defined benefit
pension surplus and as a consequence the amount of deferred tax on that surplus.
The adoption of IFRIC 14 at 1 January 2009 has not impacted the balance sheet.
IFRS 8: Operating Segments, which introduces the management approach to segment
reporting. This is mandatory for the year ending 31 December 2009 and requires
disclosure of segment information based on internal reports regularly reviewed
by the Board, in order to assess each segment's performance and to allocate
resources to them. There is no profit impact from the adoption of IFRS 8 by the
Group in 2009.
Revised IAS 23: Borrowing Costs, requires that an entity capitalise borrowing
costs directly attributable to the acquisition, construction or production of a
qualifying asset as part of the cost of that asset and removes the option to
expense borrowing costs. The revised IAS 23 has become mandatory for the
Group's 2009 consolidated financial statements and accords with the policy
already adopted by the Group. In accordance with the transitional provisions,
the Group has applied the revised IAS 23 to qualifying assets for which
capitalisation of borrowing costs commences on or after the effective date.
Therefore there is no impact on prior periods in the Group's 2009 consolidated
financial statements.
IFRIC 13: Customer Loyalty Programmes, addresses the accounting by entities that
operate, or otherwise participate in, customer loyalty programmes under which
customers can redeem credits for awards such as free or discounted goods or
services. IFRIC 13 is mandatory for the Group's 2009 consolidated financial
statements. There has been no material effect following the adoption of this
standard.
Revised IAS 1: Presentation of Financial Statements (2007), introduces the term
"total comprehensive income", which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total comprehensive income may be presented in either a
single statement of comprehensive income (effectively combining both the Income
Statement and all non-owner changes in equity in a single statement), or in an
Income Statement and a separate Statement of Comprehensive Income. Revised IAS
1, which is mandatory for the Group's 2009 consolidated financial statements,
and the Group has provided total comprehensive income in a single Statement of
Comprehensive Income in its 2009 consolidated financial statements.
Amendment to IFRS 2: Share-based Payment - Vesting Conditions and Cancellations,
clarifies the definition of vesting conditions, introduces the concept of
non-vesting conditions, requires non-vesting conditions to be reflected in
grant-date fair value and provides the accounting treatment for non-vesting
conditions and cancellations. The amendments to IFRS 2 are mandatory for the
Group's 2009 consolidated financial statements, with retrospective application.
There has been no material effect following the adoption of this standard.
New standards and interpretations not yet adopted
Other relevant new standards and interpretations which have been endorsed but
which were not mandatory for the Group during the year under review include:
IFRS3 (revised) "Business Combinations" (mandatory for the year commencing on or
after 1 July 2009).
Amendments to IAS 27 "Consolidated and Separate Financial Statements" (mandatory
for the year commencing on or after 1 July 2009).
IFRIC 17 "Distributions of Non-Cash Assets to Owners" (mandatory for the year
commencing on or after 1 July 2009, subject to EU endorsement).
The above are not anticipated to have a material impact on the financial
statements of the Group or Company although the precise impact of IFRS3
(revised) cannot be foreseen as it is dependent on future business combinations
activity.
2. SEGMENT REPORTING
Segmental information is presented in respect of the Group's reporting segments
which are based on the Group's management and internal reporting structure in
line with the 'management approach' of IFRS 8 "Operating Segments".
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Inter-segment pricing is determined on an arm's length basis. Unallocated items
comprise mainly activities that have now been sold, central loans and borrowings
and related expenses, corporate assets (primarily the Company's head office
operations) and tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to
acquire property, plant and equipment.
The Group considers the performance of the three principal operations, being
Malmaison and Hotel du Vin, MWB Business Exchange and Liberty in assessing the
performance of the Group and making decisions about the allocation of resources.
Accordingly, these are the reporting segments disclosed. The segments are
reported in a manner consistent with the internal reporting provided by
management.
The Group therefore comprises the following reportable segments:
· Malmaison and Hotel du Vin - The ownership and operation of the Group's
branded hotels;
· MWB Business Exchange Plc - The Group's AIM quoted serviced office
subsidiary;
· Liberty Plc - The Group's AIM quoted retail operating subsidiary; and
· Central - The central costs incurred by the Group.
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 2009, together with comparative information for previous year
is summarised below:-
+--------------------------------+--------------+-------------+-------------+---------------+
| | | | | Profit/(loss) |
+--------------------------------+--------------+-------------+-------------+---------------+
| | | | | before |
+--------------------------------+--------------+-------------+-------------+---------------+
| | Revenue | EBITDA | EBIT | taxation |
+--------------------------------+--------------+-------------+-------------+---------------+
| Year ended 31 December 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+--------------+-------------+-------------+---------------+
| Malmaison and Hotel du Vin | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| Operating income | 111,034 | 26,587 | 16,460 | (1,443) |
+--------------------------------+--------------+-------------+-------------+---------------+
| Pre-opening costs | | (146) | (146) | (146) |
| | - | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| | 111,034 | 26,441 | 16,314 | (1,589) |
+--------------------------------+--------------+-------------+-------------+---------------+
| | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| MWB Business Exchange Plc | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| Operating income | 112,416 | 9,806 | 4,414 | 4,209 |
+--------------------------------+--------------+-------------+-------------+---------------+
| | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| Liberty Plc | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| Operating income | 60,774 | 3,004 | 1,025 | 293 |
+--------------------------------+--------------+-------------+-------------+---------------+
| Reorganisation costs | | (135) | (135) | (135) |
+--------------------------------+--------------+-------------+-------------+---------------+
| Expenditure on brand | | (2,761) | (3,550) | (3,550) |
| | - | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| | 60,774 | 108 | (2,660) | (3,392) |
+--------------------------------+--------------+-------------+-------------+---------------+
| | | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| Others | 75 | (71) | (71) | (70) |
+--------------------------------+--------------+-------------+-------------+---------------+
| Group debt less cash | | | | (7,062) |
| | - | - | - | |
+--------------------------------+--------------+-------------+-------------+---------------+
| | 75 | (71) | (71) | (7,132) |
+--------------------------------+--------------+-------------+-------------+---------------+
| Head office administration | | (7,484) | (7,518) | (7,518) |
| | - | | | |
+--------------------------------+--------------+-------------+-------------+---------------+
| | 75 | (7,555) | (7,589) | (14,650) |
+--------------------------------+--------------+-------------+-------------+---------------+
| | 284,299 | 28,800 | 10,479 | (15,422) |
+--------------------------------+--------------+-------------+-------------+---------------+
Notes
1. EBITDA = Earnings before interest, taxation, depreciation and
amortisation.
2. EBIT = Earnings before interest and taxation.
+--------------------------------+------------+------------+-----------+---------------+
| | | | | Profit/(loss) |
+--------------------------------+------------+------------+-----------+---------------+
| | | | | before |
+--------------------------------+------------+------------+-----------+---------------+
| | Revenue | EBITDA | EBIT | taxation |
+--------------------------------+------------+------------+-----------+---------------+
| Year ended 31 December 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+------------+------------+-----------+---------------+
| Malmaison and Hotel du Vin | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| Operating income | 107,636 | 26,453 | 17,413 | (632) |
+--------------------------------+------------+------------+-----------+---------------+
| Property disposals | - | 710 | 710 | 710 |
+--------------------------------+------------+------------+-----------+---------------+
| Pre-opening costs | | (1,266) | (1,266) | (1,266) |
| | - | | | |
+--------------------------------+------------+------------+-----------+---------------+
| | 107,636 | 25,897 | 16,857 | (1,188) |
+--------------------------------+------------+------------+-----------+---------------+
| | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| MWB Business Exchange Plc | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| Operating income | 118,544 | 18,088 | 13,641 | 14,003 |
+--------------------------------+------------+------------+-----------+---------------+
| | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| Liberty Plc | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| Operating income | 50,850 | 1,815 | (435) | (961) |
+--------------------------------+------------+------------+-----------+---------------+
| Reorganisation costs | - | (1,346) | (1,346) | (1,346) |
+--------------------------------+------------+------------+-----------+---------------+
| Expenditure on brand | | (4,344) | (4,344) | (4,344) |
| | - | | | |
+--------------------------------+------------+------------+-----------+---------------+
| | 50,850 | (3,875) | (6,125) | (6,651) |
+--------------------------------+------------+------------+-----------+---------------+
| | | | | |
+--------------------------------+------------+------------+-----------+---------------+
| Others | 846 | 1,397 | 1,397 | 1,534 |
+--------------------------------+------------+------------+-----------+---------------+
| Group debt less cash | | | | (7,130) |
| | - | - | - | |
+--------------------------------+------------+------------+-----------+---------------+
| | 846 | 1,397 | 1,397 | (5,596) |
+--------------------------------+------------+------------+-----------+---------------+
| Head office administration | | (10,391) | (10,494) | (10,494) |
| | - | | | |
+--------------------------------+------------+------------+-----------+---------------+
| | 846 | (8,994) | (9,097) | (16,090) |
+--------------------------------+------------+------------+-----------+---------------+
| | 277,876 | 31,116 | 15,276 | (9,926) |
+--------------------------------+------------+------------+-----------+---------------+
There were no differences in the measurement of the segment's results and the
Group's results.
Consolidated Income Statement analysis - including entity-wide disclosures
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Year ended 31 December 2009 | Malmaison | MWB Business | Liberty | Central | Consolidated |
| | & | Exchange Plc | Plc | GBP'000 | GBP'000 |
| | Hotel du | GBP'000 | GBP'000 | | |
| | Vin | | | | |
| | GBP'000 | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total external revenues | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Hotel income | 111,034 | - | - | - | 111,034 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Licence fee income | - | 112,416 | - | - | 112,416 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Retail income | - | - | 60,774 | - | 60,774 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Management fee income | | | | 75 | 75 |
| | - | - | - | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Revenue per the Consolidated Income | 111,034 | 112,416 | 60,774 | 75 | 284,299 |
| Statement | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Inter-segment revenue | | | | | |
| | - | - | - | - | - |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total segment revenue | 111,034 | 112,416 | 60,774 | 75 | 284,299 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total segment revenue by geographical | | | | | |
| origin | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| United Kingdom | 111,034 | 112,416 | 50,709 | 75 | 274,234 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Japan | | | 10,065 | | 10,065 |
| | - | - | | - | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | 111,034 | 112,416 | 60,774 | 75 | 284,299 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Segment result | 16,460 | 4,414 | 890 | (7,589) | 14,175 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Project start-up expenses | | | | | (3,696) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Profit before finance income, finance | | | | | |
| expenses and | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| taxation | | | | | 10,479 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Interest income | | | | | 310 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Interest expense | | | | | (26,211) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Taxation | | | | | (655) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Loss for the year | | | | | (16,077) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
Consolidated Income Statement analysis - including entity-wide disclosures
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Year ended 31 December 2008 | Malmaison | MWB Business | Liberty | Central | Consolidated |
| | & | Exchange Plc | Plc | GBP'000 | GBP'000 |
| | Hotel du | GBP'000 | GBP'000 | | |
| | Vin | | | | |
| | GBP'000 | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Total external revenues | | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Hotel income | 107,636 | - | - | - | 107,636 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Licence fee income | - | 118,544 | - | - | 118,544 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Retail income | - | - | 50,850 | - | 50,850 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Proceeds from sale of trading | | | | 846 | 846 |
| properties | - | - | - | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Revenue per the Consolidated Income | 107,636 | 118,544 | 50,850 | 846 | 277,876 |
| Statement | | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Inter-segment revenue | | 164 | | | 164 |
| | - | | - | - | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Total segment revenue | 107,636 | 118,708 | 50,850 | 846 | 278,040 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Total segment revenue by geographical | | | | | |
| origin | | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| United Kingdom | 107,636 | 118,708 | 43,793 | 846 | 270,983 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Japan | | | 7,057 | | 7,057 |
| | - | - | | - | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| | 107,636 | 118,708 | 50,850 | 846 | 278,040 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Segment result | 18,123 | 13,641 | (1,781) | (9,097) | 20,886 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Project start-up expenses | | | | | (5,610) |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Profit before finance income, finance | | | | | |
| expenses and | | | | | |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| taxation | | | | | 15,276 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Interest income | | | | | 1,694 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Interest expense | | | | | (26,896) |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Taxation | | | | | 10,215 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
| Profit for the year | | | | | 289 |
+----------------------------------------+------------+--------------+------------+-----------+--------------+
Consolidated Statement of Financial Position
+----------------------------------------+------------+--------------+------------+------------+--------------+
| 31 December 2009 | Malmaison | MWB Business | Liberty | Central | Consolidated |
| | & | Exchange Plc | Plc | GBP'000 | GBP'000 |
| | Hotel du | GBP'000 | GBP'000 | | |
| | Vin | | | | |
| | GBP'000 | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total assets | 498,807 | 81,221 | 73,743 | 13,405 | 667,176 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total liabilities | (304,011) | (63,145) | (36,177) | (87,594) | (490,927) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Segment net assets/(liabilities) | 194,796 | 18,076 | 37,566 | (74,189) | 176,249 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Capital expenditure in the year | 2,938 | 7,615 | 2,767 | 13 | 13,333 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Depreciation in the year | 10,127 | 5,370 | 2,278 | 34 | 17,809 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
+----------------------------------------+------------+--------------+------------+------------+--------------+
| 31 December 2008 | Malmaison | MWB Business | Liberty | Central | Consolidated |
| | & | Exchange Plc | Plc | GBP'000 | GBP'000 |
| | Hotel du | GBP'000 | GBP'000 | | |
| | Vin | | | | |
| | GBP'000 | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total assets | 505,618 | 92,968 | 70,982 | 15,280 | 684,848 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Total liabilities | (303,385) | (57,315) | (33,609) | (86,740) | (481,049) |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Segment net assets/(liabilities) | 202,233 | 35,653 | 37,373 | (71,460) | 203,799 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Capital expenditure in the year | 47,783 | 4,067 | 2,483 | 69 | 54,402 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| | | | | | |
+----------------------------------------+------------+--------------+------------+------------+--------------+
| Depreciation in the year | 9,040 | 4,447 | 2,250 | 103 | 15,840 |
+----------------------------------------+------------+--------------+------------+------------+--------------+
There are no differences in the measurement of the segments' assets and the
Group's assets and liabilities.
3. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION
("EBITDA")
+--------------------------------------------+------------+-----------+
| | Year ended | Year |
| | 31 | ended |
| | December | 31 |
| | 2009 | December |
| | GBP'000 | 2008 |
| | | GBP'000 |
+--------------------------------------------+------------+-----------+
| The EBITDA of the Group is calculated as | | |
| follows:- | | |
+--------------------------------------------+------------+-----------+
| | | |
+--------------------------------------------+------------+-----------+
| Profit before finance income, finance | 10,479 | 15,276 |
| expenses and taxation | | |
+--------------------------------------------+------------+-----------+
| Add depreciation of property, plant and | | |
| equipment and | | |
+--------------------------------------------+------------+-----------+
| amortisation for the year | 18,321 | 15,840 |
+--------------------------------------------+------------+-----------+
| Total EBITDA for the year | 28,800 | 31,116 |
+--------------------------------------------+------------+-----------+
4. FINANCE INCOME AND EXPENSES
+----------------------------------------------+------------+-----------+
| | Year ended | Year |
| | 31 | ended |
| | December | 31 |
| | 2009 | December |
| | GBP'000 | 2008 |
| | | GBP'000 |
+----------------------------------------------+------------+-----------+
| The finance income arose as follows:- | | |
+----------------------------------------------+------------+-----------+
| | | |
+----------------------------------------------+------------+-----------+
| Interest income on cash deposits for the | 310 | 1,671 |
| year | | |
+----------------------------------------------+------------+-----------+
| Defined benefit pension scheme net financing | | 23 |
| income | - | |
+----------------------------------------------+------------+-----------+
| Total finance income for the year | 310 | 1,694 |
+----------------------------------------------+------------+-----------+
| | | |
+----------------------------------------------+------------+-----------+
| The finance expenses arose on financial | | |
| liabilities measured at | | |
+----------------------------------------------+------------+-----------+
| amortised cost as follows:- | | |
+----------------------------------------------+------------+-----------+
| Unsecured Loan Stock 2009/2012 | 2,925 | 2,925 |
+----------------------------------------------+------------+-----------+
| Bank loans and overdrafts | 18,837 | 24,275 |
+----------------------------------------------+------------+-----------+
| Defined benefit pension scheme net financing | 125 | - |
| expense | | |
+----------------------------------------------+------------+-----------+
| Amortisation of debt issue costs | 4,418 | 1,135 |
+----------------------------------------------+------------+-----------+
| | 26,305 | 28,335 |
+----------------------------------------------+------------+-----------+
| Less finance costs capitalised in respect of | | |
| development | | |
+----------------------------------------------+------------+-----------+
| expenditure before tax relief | (94) | (1,439) |
+----------------------------------------------+------------+-----------+
| Total finance expenses for the year | 26,211 | 26,896 |
+----------------------------------------------+------------+-----------+
5. TAXATION
+---------------------------------------------+------------+-----------+
| | Year ended | Year |
| | 31 | ended |
| | December | 31 |
| | 2009 | December |
| | GBP'000 | 2008 |
| | | GBP'000 |
+---------------------------------------------+------------+-----------+
| Current taxation (charge)/credit | | |
+---------------------------------------------+------------+-----------+
| UK Corporation tax | | |
+---------------------------------------------+------------+-----------+
| Tax on loss for the year | - | - |
+---------------------------------------------+------------+-----------+
| Adjustment in respect of prior year | | |
| provisions following | | |
+---------------------------------------------+------------+-----------+
| agreement of taxation liabilities | (7) | 16,402 |
+---------------------------------------------+------------+-----------+
| | | |
+---------------------------------------------+------------+-----------+
| Foreign tax | | |
+---------------------------------------------+------------+-----------+
| Tax on profit for the year | (690) | (395) |
+---------------------------------------------+------------+-----------+
| | (697) | 16,007 |
+---------------------------------------------+------------+-----------+
| | | |
+---------------------------------------------+------------+-----------+
| Deferred taxation credit/(charge) | | |
+---------------------------------------------+------------+-----------+
| | | |
+---------------------------------------------+------------+-----------+
| Deferred tax asset arising/(written off) on | | |
| accelerated capital | | |
+---------------------------------------------+------------+-----------+
| allowances, trading tax losses, | | |
| unrelieved capital expenditure | | |
+---------------------------------------------+------------+-----------+
| and interest payments | 42 | (5,792) |
+---------------------------------------------+------------+-----------+
| Total taxation (charge)/credit | (655) | 10,215 |
+---------------------------------------------+------------+-----------+
No tax was recognised directly in equity during the year ended 31 December 2009
or during the previous year.
The taxation (charges)/credit has been increased from the amount that would
arise from applying the prevailing corporation tax rate to the loss before
taxation in the Consolidated Income Statement, as follows:-
+--------------------------------------------+------------+-----------+
| | Year ended | Year |
| | 31 | ended |
| | December | 31 |
| | 2009 | December |
| | GBP'000 | 2008 |
| | | GBP'000 |
+--------------------------------------------+------------+-----------+
| UK corporation tax credit at 28% (2008: | | |
| 28.5%) on the loss | | |
+--------------------------------------------+------------+-----------+
| before taxation in Consolidated Income | 4,318 | 2,829 |
| Statement | | |
+--------------------------------------------+------------+-----------+
| Excess of depreciation charged over | | |
| capital allowances | | |
+--------------------------------------------+------------+-----------+
| claimed | (4,421) | (1,202) |
+--------------------------------------------+------------+-----------+
| Expenditure permanently disallowed for | | |
| taxation purposes | | |
+--------------------------------------------+------------+-----------+
| and unrelieved tax losses | (4,022) | (2,311) |
+--------------------------------------------+------------+-----------+
| Difference between taxation provisions on | | |
| chargeable gains | | |
+--------------------------------------------+------------+-----------+
| on disposals of properties and | | |
| accounting profits on such | | |
+--------------------------------------------+------------+-----------+
| Disposals | (142) | - |
+--------------------------------------------+------------+-----------+
| Adjustment of provision made in respect of | | |
| prior years | | |
+--------------------------------------------+------------+-----------+
| following agreement of taxation | (7) | 16,402 |
| liabilities | | |
+--------------------------------------------+------------+-----------+
| Taxation on overseas earnings at higher | | |
| rate than UK | | |
+--------------------------------------------+------------+-----------+
| corporation tax | (264) | (136) |
+--------------------------------------------+------------+-----------+
| Profits not taxable and capitalised | | |
| expenditure deductible for | | |
+--------------------------------------------+------------+-----------+
| taxation purposes | 26 | 400 |
+--------------------------------------------+------------+-----------+
| Tax losses brought forward from earlier | | |
| periods utilised in | | |
+--------------------------------------------+------------+-----------+
| current period | 3,815 | 25 |
+--------------------------------------------+------------+-----------+
| Total corporation tax charge for the year | (697) | 16,007 |
+--------------------------------------------+------------+-----------+
| | | |
+--------------------------------------------+------------+-----------+
| Deferred tax asset (written off)/arising | | |
| on accelerated capital | | |
+--------------------------------------------+------------+-----------+
| allowances, trading tax losses, | | |
| unrelieved capital | | |
+--------------------------------------------+------------+-----------+
| expenditure and interest payments | 42 | (5,792) |
+--------------------------------------------+------------+-----------+
| Taxation (charge)/credit for the year | (655) | 10,215 |
+--------------------------------------------+------------+-----------+
6. LOSS PER SHARE
The loss per share figures are calculated by dividing the loss attributable to
equity holders of the Company for the year, by the weighted average number of
shares or units in issue during the year, as follows:-
+-----------------------------------+----------+-----------+----------+
| | | Year | Year |
| | | ended | ended |
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+-----------------------------------+----------+-----------+----------+
| Loss for the year attributable to | | | |
| equity | | | |
+-----------------------------------+----------+-----------+----------+
| shareholders of the Company | GBP'000 | (15,948) | (2,718) |
+-----------------------------------+----------+-----------+----------+
| Weighted average number of units | | | |
| or ordinary | | | |
+-----------------------------------+----------+-----------+----------+
| shares in issue during the year | '000 | 72,371 | 76,291 |
+-----------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------+----------+-----------+----------+
| Loss per share (basic and | Pence | (22.0p) | (3.6p) |
| diluted) | | | |
+-----------------------------------+----------+-----------+----------+
7. INTANGIBLE ASSETS AND GOODWILL
+---------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+----------+
| Brand | 18,200 | 18,200 |
+---------------------------------------------+------------+----------+
| | | |
+---------------------------------------------+------------+----------+
| Goodwill | | |
+---------------------------------------------+------------+----------+
| - Stanhope Business Centres Limited | 7,587 | 7,587 |
+---------------------------------------------+------------+----------+
| - MLS | 2,825 | - |
+---------------------------------------------+------------+----------+
| - Liberty Japan Company Limited | 182 | 182 |
+---------------------------------------------+------------+----------+
| At 31 December 2009 | 28,794 | 25,969 |
+---------------------------------------------+------------+----------+
The brand value of GBP18.2m relates to the Liberty brand. The Directors
consider that the Group's brand has an indefinite life due to the durability of
the underlying business. This 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.
At 31 December 2009, the value in use was determined by discounting future cash
flows generated from continuing use of the cash generating unit. This is based
on projected cash flows in the Company's 5 year business plan and further
projections for years 6 to 10 to produce a 10 year cash flow model. A 2% growth
assumption has been applied to cash flows at the end of year 10. Forecast
annual revenue growth included in the projections is 5.8% in 2010, 3.4% by year
5 reflecting the 5 year business plan and 3.2% by year 10. The cash flows
generated from the business plan project net outflows in 2009 and 2010 with net
cash inflows beginning in 2011. A pre-tax discount rate of 10% was applied to
resultant cash flows to determine present day value in use, reflecting current
market assessments of risk specific to the asset. The values assigned also
represent assessments of future trends in the retail industry and are based on
both external sources and internal historical data. The above calculation of
value in use is particularly sensitive in two areas: a movement of 1% in the
discount rate would affect the calculated value of the brand by GBP5m, and a
movement of 1% in future planned net cash inflows before capital expenditure,
central costs and working capital movements would affect the calculated value of
the brand by approximately GBP7m. The impairment review at 31 December 2009
supported the value in use of the Liberty brand at more than the book value of
GBP18.2m at which it has been included in the financial statements of the Group
throughout the year. Accordingly the brand has been retained at a value of
GBP18.2m in these financial statements.
The Group acquired Stanhope Business Centres Limited in 2007, a serviced office
business based in London, Goodwill of GBP7.6m arose on this acquisition and was
recognised in the year ended 31 December 2007. An impairment review of the
Stanhope Business Centres goodwill was undertaken by the Directors on 31
December 2009. This compared the carrying value of goodwill with the
anticipated recoverable amount of the two business centres owned by Stanhope
Business Centres which are the cash-generating unit to which the goodwill was
allocated. The recoverable amount of the cash-generating unit is based on value
in use, which is calculated from cash flow projections for the lifetimes of the
underlying leases, using data from Board approved budgets covering the period to
31 December 2011. The key assumptions for the value in use calculations were
discount rates, licence fee income, client renewals and occupancy rates. The
Directors estimate discount rates using pre-tax rates that reflect the current
market assessments of the time value of money and risks specific to the
cash-generating units, and they consider the appropriate pre-tax risk adjusted
discount rate is 11%. Changes in licence fee income, client renewals, occupancy
rates and direct costs are based on assumed compound growth rates of 2% to 5%,
as well as past experience and expectations of future changes in the market.
Based on this review, the Directors concluded that there had been no impairment
to the Stanhope Business Centres goodwill during the year ended 31 December
2009.
During the period 29 April to 1 June 2009 the Group acquired 16 business centres
(one of which was subsequently closed) formerly of MLS Group PLC ("MLS"). These
centres are complementary to the Business Exchange portfolio and in line with
its stated strategy of focusing on London and the surrounding area. The
transactions were accounted for using the purchase method of accounting as
summarised below, which gave rise to goodwill of GBP2.8m.
+--------------------------------------------------------+--------------+
| | Fair value |
+--------------------------------------------------------+--------------+
| | GBP'000 |
+--------------------------------------------------------+--------------+
| | |
+--------------------------------------------------------+--------------+
| Net assets acquired | |
+--------------------------------------------------------+--------------+
| | |
+--------------------------------------------------------+--------------+
| Property, plant and equipment | 732 |
+--------------------------------------------------------+--------------+
| Lease deposit | 225 |
+--------------------------------------------------------+--------------+
| Licensee deposit liabilities | (1,414) |
+--------------------------------------------------------+--------------+
| Finance lease and other liabilities | (230) |
+--------------------------------------------------------+--------------+
| | (687) |
+--------------------------------------------------------+--------------+
| Goodwill | 2,825 |
+--------------------------------------------------------+--------------+
| Total consideration | 2,138 |
+--------------------------------------------------------+--------------+
| | |
+--------------------------------------------------------+--------------+
| Satisfied by: | |
+--------------------------------------------------------+--------------+
| | |
+--------------------------------------------------------+--------------+
| Cash paid and payable | 943 |
+--------------------------------------------------------+--------------+
| Directly attributable costs | 1,195 |
+--------------------------------------------------------+--------------+
| | 2,138 |
+--------------------------------------------------------+--------------+
No cash or cash equivalents were acquired.
An impairment review of the goodwill arising from the MLS acquisition was
undertaken by the Directors on 31 December 2009. The criteria, assumptions and
methodology used were similar to those described in relation to the Stanhope
Business Centres. Based on this review, the Directors concluded that there had
been no impairment to the MLS goodwill during the year ended 31 December 2009.
8. PROPERTY, PLANT AND EQUIPMENT
+--------------------+-------------+----------+-----------+--------------+--------------+------------+------------+
| | -----------------Operational | | |
| | properties------------------ | | |
+--------------------+------------------------------------------------------------------+------------+------------+
| | | | | | Plant, | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | | | In the | Operating | machinery, | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | | Long | course | leasehold | fixtures | |
| | | | of | | & | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | Freehold | leasehold | Construction | improvements | equipment | Total |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Cost or valuation | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| At 1 January 2009 | 334,951 | 134,153 | 1,691 | 39,251 | 117,572 | 627,618 |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Additions | 733 | (6) | 273 | 4,451 | 8,702 | 14,153 |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Disposals | - | - | (35) | (26) | (749) | (810) |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Written off | - | - | - | (1,095) | (19,902) | (20,997) |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Revaluation | (267) | (4,951) | | - | | (5,218) |
| | | | - | | - | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| At 31 December | 335,417 | 129,196 | 1,929 | 42,581 | 105,623 | 614,746 |
| 2009 | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Depreciation | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| At 1 January 2009 | - | - | - | (5,711) | (55,975) | (61,686) |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Charge for the | (2,338) | (739) | - | (3,165) | (11,567) | (17,809) |
| year | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Disposals | - | - | - | 1 | 140 | 141 |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Written off | - | - | - | 1,095 | 19,902 | 20,997 |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Revaluation | 2,338 | 739 | | - | | 3,077 |
| | | | - | | - | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| At 31 December | | - | | (7,780) | (47,500) | (55,280) |
| 2009 | - | | - | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Net book value | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| at 31 December | 335,417 | 129,196 | 1,929 | 34,801 | 58,123 | 559,466 |
| 2009 | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Analysis of | | | | | | |
| valuation deficit | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| for the year | | | | | | |
+--------------------+-------------+----------------------+--------------+--------------+------------+------------+
| Deficit debited to | | | | | | |
| revaluation | | | | | | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| reserve | 1,574 | (3,475) | - | - | - | (1,901) |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| Deficit debited to | | | | | | |
| minority | | | | | | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| interests (note | 497 | (737) | - | - | | (240) |
| 15) | | | | | - | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| | | | | | | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| Revaluation | | | | | | |
| deficit reflected | | | | | | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| in property, | | | | | | |
| plant and | | | | | | |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| equipment | 2,071 | (4,212) | - | - | - | (2,141) |
+--------------------+------------------------+-----------+--------------+--------------+------------+------------+
| | | | | | | | |
+--------------------+-------------+----------+-----------+--------------+--------------+------------+------------+
+-----------------------------------------------+-----------+----------+
| Operational properties at net book value | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+-----------------------------------------------+-----------+----------+
| Freehold properties as above | 335,417 | 334,951 |
+-----------------------------------------------+-----------+----------+
| Long leasehold properties as above | 129,196 | 134,153 |
+-----------------------------------------------+-----------+----------+
| Operating leasehold improvements as above | 34,801 | 33,540 |
+-----------------------------------------------+-----------+----------+
| Total operational properties per consolidated | 499,414 | 502,644 |
| balance sheet | | |
+-----------------------------------------------+-----------+----------+
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | --------------------------Operational | | |
| | properties------------------------ | | |
+---------------------+-----------------------------------------------------------+------------+------------+
| | | | | | Plant, | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | | | In | Operating | machinery, | |
| | | | the | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | | Long | course | leasehold | fixtures | |
| | | | of | | & | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | Freehold | leasehold | construction | improvements | equipment | Total |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Group | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Cost or valuation | | | | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| At 1 January 2008 | 345,521 | 142,995 | 26,047 | 37,139 | 103,991 | 655,693 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Additions | 36,165 | 1,068 | 1,608 | 2,704 | 14,282 | 55,827 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Reclassification | 25,964 | - | (25,964) | (311) | 311 | - |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Disposals | (140) | - | - | (281) | (1,012) | (1,433) |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Revaluation | (72,559) | (9,910) | | | | (82,469) |
| | | | - | - | - | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| At 31 December 2008 | 334,951 | 134,153 | 1,691 | 39,251 | 117,572 | 627,618 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | | | | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Depreciation | | | | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| At 1 January 2008 | - | - | - | (2,992) | (47,068) | (50,060) |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Charge for the year | (2,374) | (864) | - | (2,720) | (9,882) | (15,840) |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Disposals | - | - | - | 1 | 975 | 976 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Revaluation | 2,374 | 864 | | | | 3,238 |
| | | | - | - | - | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| At 31 December 2008 | | | | (5,711) | (55,975) | (61,686) |
| | - | - | - | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| | | | | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| Net book value | | | | | | |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
| at 31 December 2008 | 334,951 | 134,153 | 1,691 | 33,540 | 61,597 | 565,932 |
+---------------------+---------------+-------------+--------------+--------------+------------+------------+
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 2009 by qualified
professional valuers working for the company of DTZ, 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 2009, 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 2010. DTZ has 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 has 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 6th Edition ("the Manual") and the properties were valued on
the basis of Existing Use Value. Existing Use 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, wherein the parties had acted
knowledgeably, prudently and without compulsion, assuming that the buyer is
granted vacant possession of all parts of the property required by the business
and disregarding potential alternative uses and any other characteristics of the
property that would cause its Market Value to differ from that needed to replace
the remaining service potential.
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 2009 carried in the balance sheet at
valuation included in property, plant and equipment totalled GBP513.5m. 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 2009 of GBP46m.
The historic cost of the Group's properties at 31 December 2009 includes
capitalised interest of GBP9.4m (31 December 2008: GBP9.3m).
The reconciliation of the values at which the properties are included in the
above table with their original cost less accumulated depreciation, is as
follows:-
+---------------------------------+--------------+------------+-----------+
| | Original | Cumulative | |
| | cost less | | |
+---------------------------------+--------------+------------+-----------+
| | accumulated | valuation | |
+---------------------------------+--------------+------------+-----------+
| | depreciation | surplus | Valuation |
| | at | at | at |
+---------------------------------+--------------+------------+-----------+
| | 31 December | 31 | 31 |
| | 2009 | December | December |
| | | 2009 | 2009 |
+---------------------------------+--------------+------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+--------------+------------+-----------+
| Operational properties | | | |
+---------------------------------+--------------+------------+-----------+
| Freehold properties | 244,491 | 90,926 | 335,417 |
+---------------------------------+--------------+------------+-----------+
| Long leasehold properties | 70,048 | 59,148 | 129,196 |
+---------------------------------+--------------+------------+-----------+
| Operational properties in the | | | |
| course of | | | |
+---------------------------------+--------------+------------+-----------+
| construction | 1,929 | - | 1,929 |
+---------------------------------+--------------+------------+-----------+
| Operating leasehold | 34,801 | | 34,801 |
| improvements | | - | |
+---------------------------------+--------------+------------+-----------+
| | 351,269 | 150,074 | 501,343 |
+---------------------------------+--------------+------------+-----------+
| Plant, machinery, fixtures and | 58,123 | | 58,123 |
| equipment | | - | |
+---------------------------------+--------------+------------+-----------+
| At 31 December 2009 | 409,392 | 150,074 | 559,466 |
+---------------------------------+--------------+------------+-----------+
Segmental analysis
The Group's property, plant and equipmentwas in the following operating
businesses at 31 December 2009:-
+------------------------+-------------+--------------+------------+--------------+
| | | Operational | | |
+------------------------+-------------+--------------+------------+--------------+
| | | properties | Plant, | |
+------------------------+-------------+--------------+------------+--------------+
| | | in the | machinery, | |
+------------------------+-------------+--------------+------------+--------------+
| | Operational | course | fixtures | |
| | | of | & | |
+------------------------+-------------+--------------+------------+--------------+
| | properties | construction | equipment | Total |
+------------------------+-------------+--------------+------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+-------------+--------------+------------+--------------+
| Malmaison and Hotel du | 438,554 | 1,929 | 42,602 | 483,085 |
| Vin | | | | |
+------------------------+-------------+--------------+------------+--------------+
| MWB Business Exchange | 34,652 | - | 9,812 | 44,464 |
| Plc | | | | |
+------------------------+-------------+--------------+------------+--------------+
| Liberty Plc | 26,208 | - | 5,650 | 31,858 |
+------------------------+-------------+--------------+------------+--------------+
| Central assets | | | 59 | 59 |
| | - | - | | |
+------------------------+-------------+--------------+------------+--------------+
| | 499,414 | 1,929 | 58,123 | 559,466 |
+------------------------+-------------+--------------+------------+--------------+
The majority of the Group's borrowings and its undrawn facilities are secured by
charges on substantially all of the Group's property, plant and equipment.
9. TRADE AND OTHER RECEIVABLES
+------------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+------------------------------------------------+------------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+----------+
| Due after more than one year | | |
+------------------------------------------------+------------+----------+
| Other receivables | 2,569 | 2,660 |
+------------------------------------------------+------------+----------+
| Due within one year | | |
+------------------------------------------------+------------+----------+
| Trade receivables | 12,566 | 12,603 |
+------------------------------------------------+------------+----------+
| Other receivables | | |
+------------------------------------------------+------------+----------+
| Other taxes and social security | 118 | 164 |
+------------------------------------------------+------------+----------+
| Other debtors | 1,009 | 1,884 |
+------------------------------------------------+------------+----------+
| Prepayments and accrued income | 17,067 | 17,942 |
+------------------------------------------------+------------+----------+
| Retention balances | 1,084 | 3,084 |
+------------------------------------------------+------------+----------+
| | 31,844 | 35,677 |
+------------------------------------------------+------------+----------+
Retention balances predominantly comprise cash funds received from tenants as
security for lease obligations. These are retained in bank accounts that are
separate from the main Group facilities and are not generally available for use
in the Group's operations.
10.CASH AND CASH EQUIVALENTS
+-----------------------------------------------+-----------+------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------------+-----------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+-----------+------------+
| Cash and cash equivalents per consolidated | 19,655 | 32,064 |
| balance sheet | | |
+-----------------------------------------------+-----------+------------+
| Less bank overdrafts per consolidated balance | | (28) |
| sheet | - | |
+-----------------------------------------------+-----------+------------+
| Net cash and cash equivalents per | | |
| consolidated cash flow | | |
+-----------------------------------------------+-----------+------------+
| statement | 19,655 | 32,036 |
+-----------------------------------------------+-----------+------------+
The Group's net cash and cash equivalents are held in the following operating
divisions of the Group.
+------------------------------------------------+-----------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+-----------+----------+
| Malmaison and Hotel du Vin | 9,011 | 4,860 |
+------------------------------------------------+-----------+----------+
| MWB Business Exchange Plc | 6,433 | 23,333 |
+------------------------------------------------+-----------+----------+
| Liberty Plc | 1,943 | 1,903 |
+------------------------------------------------+-----------+----------+
| Central | 2,268 | 1,940 |
+------------------------------------------------+-----------+----------+
| | 19,655 | 32,036 |
+------------------------------------------------+-----------+----------+
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.
11. LOANS AND BORROWINGS
+------------------------------------------------+------------+-------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+------------------------------------------------+------------+-------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+-------------+
| Current liabilities | | |
+------------------------------------------------+------------+-------------+
| | | |
+------------------------------------------------+------------+-------------+
| Secured bank loans | 3,924 | 341,827 |
+------------------------------------------------+------------+-------------+
| 9.75% Unsecured Loan Stock 2009/2012 | 7,500 | - |
+------------------------------------------------+------------+-------------+
| Other unsecured loan borrowings | | 805 |
| | - | |
+------------------------------------------------+------------+-------------+
| | 11,424 | 342,632 |
+------------------------------------------------+------------+-------------+
| Non-current liabilities | | |
+------------------------------------------------+------------+-------------+
| | | |
+------------------------------------------------+------------+-------------+
| Secured bank loans | 342,080 | 14,634 |
+------------------------------------------------+------------+-------------+
| 9.75% Unsecured Loan Stock 2009/2012 | 22,500 | 29,927 |
+------------------------------------------------+------------+-------------+
| | 364,580 | 44,561 |
+------------------------------------------------+------------+-------------+
| Total loans and borrowings | 376,004 | 387,193 |
+------------------------------------------------+------------+-------------+
Terms and debt repayment schedule
All of the Group's loans are denominated in Sterling and no foreign exchange
risk was suffered by the Group on its debt arrangements during the year ended 31
December 2009 or in the previous year. The Group's loans bear floating rates of
interest which are normally for periods ranging from one week to one year, set
by reference to LIBOR. The terms on the Group's outstanding loans at 31
December 2009, inclusive of bank margin, are summarised as follows:-
+-------------------+-------------+----------+----------+----------+------------+------------+
| | 31 December 2009 | 31 December | 31 December |
| | | 2009 | 2008 |
+-------------------+------------------------+---------------------+-------------------------+
| | Nominal | Latest | Face | Carrying | Face | Carrying |
| | interest | year | value | amount | value | amount |
| | rate | of | | | | |
| | per annum | maturity | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Current | | | | | | |
| liabilities | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Secured bank | | | | | | |
| loans | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Malmaison and | Libor + | 2010 | 5,000 | 3,924 | 284,248 | 284,248 |
| Hotel du Vin | 2.5% | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| MWB Business | Libor + | 2009 | - | - | 6,930 | 6,930 |
| Exchange Plc | 1.25% | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Central | Libor + 5% | 2009 | - | - | 50,649 | 50,649 |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Listed Unsecured | 9.75% | 2012 | 7,500 | 7,500 | - | - |
| Loan Stock | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Other unsecured | | | | | | |
| loan | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| borrowings - | 9.0% | 2009 | | | 810 | 805 |
| central | | | - | - | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | 12,500 | 11,424 | 342,637 | 342,632 |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Non-current | | | | | | |
| liabilities | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Secured bank | | | | | | |
| loans | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Malmaison and | Libor + | 2011 | 278,487 | 277,222 | - | - |
| Hotel du Vin | 2.5% | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| MWB Business | Base/Libor | 2011 | - | - | - | - |
| Exchange Plc | + 2.75% | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Liberty Plc | Base/Libor | 2011 | 12,543 | 12,543 | 14,634 | 14,634 |
| | + 2.5% | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Listed Unsecured | 9.75% | 2012 | 22,500 | 22,500 | 30,000 | 29,927 |
| Loan Stock | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| Other unsecured | | | | | | |
| loan | | | | | | |
+-------------------+-------------+----------+----------+----------+------------+------------+
| borrowings - | Libor + | 2011 | 53,000 | 52,315 | | |
| central | 5.0% | | | | - | - |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | 366,530 | 364,580 | 44,634 | 44,561 |
+-------------------+-------------+----------+----------+----------+------------+------------+
| | | | 379,030 | 376,004 | 387,271 | 387,193 |
+-------------------+-------------+----------+----------+----------+------------+------------+
The Company may purchase the listed Unsecured Loan Stock by tender or in the
market. The Loan Stock is redeemable at the Company's option at any time after
30 June 2009 at par plus accrued interest; any Loan Stock outstanding on 30
June 2012 will be redeemed by the Company at par plus accrued interest.
The majority of the Group's borrowings and its undrawn facilities are secured by
charges on substantially all of the Group's property, plant and equipment. The
secured loans are proportionately repayable if any of the underlying security is
sold.
Extension of term of bank facilities
In 2009, the Group extended GBP363m of its banking facilities provided by Bank
of Scotland and Royal Bank of Scotland. The terms of these facilities,
comprising three separate loans to Malmaison and Hotel du Vin, MWB Business
Exchange, Liberty and MWB itself, have now been extended to 31 December 2011.
Because of this extension, loans shown as current liabilities in 2008 are now
medium term and therefore non-current liabilities in 2009.
Loan covenants
The Malmaison and Hotel du Vin division has four covenant tests in its banking
facility, being EBITDA to Interest Cover, Cashflow Cover, Loan to Value Cover
and Debt to EBITDA Cover. All such covenants were met for the year ended 31
December 2009 and are forecast to be met for the next eighteen months. The
Malmaison and Hotel du Vin Loan to Value Covenant requires the loan to be no
more than 72.5% of the value of the secured property. At 31 December 2009, the
Loan to Value percentage amounted to 58.8% of the secured realisable property
value.
Business Exchange has three covenant tests in relation to its bank facility,
namely Debt Service Cover, Senior Interest Cover and EBITDA to Debt Cover. Debt
Service Cover requires the ratio of Net Cash to Senior Interest to be not less
than 1:1; Senior Interest Cover requires the ratio of EBIT to Senior Interest to
be not less than 4:1; and EBITDA to Debt Cover requires the ratio of EBITDA to
Debt to be not less than 1:1. This loan was not drawn down at 31 December 2009.
Liberty has three covenant tests in relation to its bank facility, namely Loan
to Value Security Cover, Debt Service Cover and Senior Interest Cover, with
Liberty of London brand costs and other one-off costs excluded from the test of
the latter two. Security Cover requires the loan to be no more than 67% of the
Realisation Value of the Tudor Building. At 31 December 2009, the Tudor
Building was valued at GBP30.25m, and GBP12.5m of facilities were utilised.
Accordingly, the Loan to Value Security Cover was only 41% at that date,
demonstrating significant headroom. Sufficient headroom is also forecast over
the period covered by the Projections. Debt Service Cover requires the ratio of
EBITDA to Total Debt Service to be not less than 1.25:1. Senior Interest Cover
requires the ratio of EBIT to Senior Interest to be not less than 1.5:1. These
covenants were met for the year ended 31 December 2009 with continuing headroom
forecast over the period covered by the Projections.
MWB Group Holdings Plc itself has two covenants in relation to its bank
facility. These covenants require consolidated EBITDA to be 125% or more than
consolidated interest expense, and for the MWB Group Holdings Plc debt,
excluding the Company's Unsecured Loan Stock, to be capped at 150% of
consolidated EBITDA. MWB Group Holdings is forecast to meet its covenants with
headroom during the eighteen months covered by the Group cash flow forecasts.
The covenant in relation to MWB Group Holdings' Unsecured Loan Stock includes a
gearing covenant restricting net debt attributable to shareholders to a maximum
of four times adjusted shareholders' funds. This covenant was met at 31
December 2009.
At the same time as the Placing that took place in January 2010, the Company
obtained an easing in the Loan Stock covenant, the Group share of net debt
threshold was increased from four to five times adjusted shareholders' funds.
Movement of loans during the year
+-----------------------------------------------+-----------+----------+
| | Year | Year |
| | ended | ended |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+-----------------------------------------------+-----------+----------+
| At start of year | 387,193 | 330,194 |
+-----------------------------------------------+-----------+----------+
| Loans drawn down | 4,069 | 74,232 |
+-----------------------------------------------+-----------+----------+
| Loans repaid | (15,258) | (17,233) |
+-----------------------------------------------+-----------+----------+
| At end of year | 376,004 | 387,193 |
+-----------------------------------------------+-----------+----------+
Net debt
The Group's loans, borrowings and cash are included in the consolidated balance
sheet at 31 December 2009 as follows:-
+-----------------------------------------------+-------------+-----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------------+-------------+-----------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+-------------+-----------+
| Loans and borrowings | 376,004 | 387,193 |
+-----------------------------------------------+-------------+-----------+
| Long leasehold obligations | 697 | 699 |
+-----------------------------------------------+-------------+-----------+
| Hire purchase and leasing contracts | 192 | - |
+-----------------------------------------------+-------------+-----------+
| Fair value of financial instruments | 5,526 | 1,894 |
+-----------------------------------------------+-------------+-----------+
| Total loans and borrowings | 382,419 | 389,786 |
+-----------------------------------------------+-------------+-----------+
| Less net cash and cash equivalents in note 10 | (19,655) | (32,036) |
+-----------------------------------------------+-------------+-----------+
| Total net debt at year end | 362,764 | 357,750 |
+-----------------------------------------------+-------------+-----------+
| | | |
+-----------------------------------------------+-------------+-----------+
| | | |
+-----------------------------------------------+-------------+-----------+
| Analysis of debt/(cash) by operating business | | |
+-----------------------------------------------+-------------+-----------+
| | | |
+-----------------------------------------------+-------------+-----------+
| Malmaison and Hotel du Vin | 278,357 | 282,322 |
+-----------------------------------------------+-------------+-----------+
| MWB Business Exchange Plc | (6,241) | (16,404) |
+-----------------------------------------------+-------------+-----------+
| Liberty Plc | 10,601 | 12,390 |
+-----------------------------------------------+-------------+-----------+
| Central debt | 80,047 | 79,442 |
+-----------------------------------------------+-------------+-----------+
| | 362,764 | 357,750 |
+-----------------------------------------------+-------------+-----------+
Undrawn facilities
At 31 December 2009, the Group had GBP11.5m (2008: GBP10.5m) of undrawn
financing facilities available for specific operating businesses of the Group.
The expiry profile of these facilities was as follows:-
+------------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+----------+
| In one year or less | 1,000 | 10,110 |
+------------------------------------------------+------------+----------+
| In more than one year | 10,471 | 367 |
+------------------------------------------------+------------+----------+
| | 11,471 | 10,477 |
+------------------------------------------------+------------+----------+
The Group's undrawn credit financing facilities are for use by the following
operating businesses:-
+------------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------------+------------+----------+
| Malmaison and Hotel du Vin | 13 | 2,081 |
+------------------------------------------------+------------+----------+
| MWB Business Exchange Plc | 8,000 | 6,029 |
+------------------------------------------------+------------+----------+
| Liberty Plc | 2,458 | 367 |
+------------------------------------------------+------------+----------+
| Central facilities | 1,000 | 2,000 |
+------------------------------------------------+------------+----------+
| | 11,471 | 10,477 |
+------------------------------------------------+------------+----------+
12. TRADE AND OTHER PAYABLES
+-----------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------------+------------+----------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+------------+----------+
| Due within one year | | |
+-----------------------------------------------+------------+----------+
| Trade payables | 29,404 | 20,347 |
+-----------------------------------------------+------------+----------+
| Other payables | 4,122 | 2,534 |
+-----------------------------------------------+------------+----------+
| Client deposits | 13,883 | 15,351 |
+-----------------------------------------------+------------+----------+
| Accruals | 33,528 | 30,878 |
+-----------------------------------------------+------------+----------+
| PAYE, NIC and VAT | 5,890 | 5,207 |
+-----------------------------------------------+------------+----------+
| Deferred income | 4 | 7 |
+-----------------------------------------------+------------+----------+
| Hire purchase and leasing contracts | 157 | |
| | | - |
+-----------------------------------------------+------------+----------+
| | 86,988 | 74,324 |
+-----------------------------------------------+------------+----------+
| Due after more than one year | | |
+-----------------------------------------------+------------+----------+
| Other payables | 550 | 596 |
+-----------------------------------------------+------------+----------+
| Operating lease incentives | 17,920 | 13,751 |
+-----------------------------------------------+------------+----------+
| Long leasehold obligations | 697 | 699 |
+-----------------------------------------------+------------+----------+
| Hire purchase and leasing contracts | 35 | |
| | | - |
+-----------------------------------------------+------------+----------+
| | 19,202 | 15,046 |
+-----------------------------------------------+------------+----------+
13. FINANCIAL INSTRUMENTS
Overall summary
The Group has exposure to the following principal risks in the operation and
management of its financing:-
(i) Liquidity risk;
(ii) Market risk;
(iii) Interest rate risk;
(iv) Currency risk; and
(v) Credit risk.
The Directors have overall responsibility for the establishment and oversight of
the Group's risk management framework. This is managed and controlled through a
detailed funding policy and capital management strategy, details of which are
set out below. The Audit Committee of the Board monitors the Group's risk
management policies and reports to the Board on its activities.
Funding policy
The Group has three principal central facilities available for investment in the
divisions, providing a total of GBP306m of medium term funds. A further GBP54m
is available from bank facilities made available to the Group centrally.
The Group borrows from banks at fixed and floating rates of interest. Interest
rate exposure from floating rate debt is hedged by financial derivative
instruments where the Board considers that interest rate rises are expected to
occur in the medium term. The principal purpose of the Group's hedging
arrangements is to protect the Group against adverse interest rate movements and
to retain some opportunity to benefit from falls in short term interest rates.
The Group does not use hedging arrangements to speculate on interest rate
movements. Derivative instruments used by the Board principally comprise
interest rate swaps, floors and collars.
The Group's treasury policies are designed to ensure that:-
(i) sufficient committed loan facilities are available to support current
and future business requirements. Cash and loan management is a core feature of
the Board's business model and two year rolling cash flow forecasts, updated on
a monthly basis, are controlled by the Executive Directors to manage these
requirements.
(ii) the interest cost on Group debt is supported as much as possible from
maintainable income flows, with the retirement of debt matched against forecast
capital inflows over short and medium term capital programmes.
(iii) interest rate exposure is managed through a combination of fixed rate
debt and interest rate swaps, thus fixing interest rates as much as possible by
reference to passing income at the date of drawdown.
Capital management
The Board's policy is to maintain a strong capital base within the Group so as
to maintain investor and creditor protection, and to maintain market confidence
in the Group. This strategy also sustains future development potential of the
Group. The Directors monitor the Return on Capital achieved by the Group, which
the Board has defined as EBITDA divided by total shareholders' equity, and its
comparison to Return on Value, being EBITDA divided by Group enterprise value.
These benchmarks of performance are used to manage and report performance within
the three principal operating businesses and for the Group as a whole. The
Directors also manage the Group's operations in a manner designed to enhance
Cash Returns to Shareholders, in accordance with the Cash Distribution
Programme.
The Board seeks to maintain a balance between the higher returns that might be
possible with higher levels of borrowings and the advantages and security
afforded by a sound capital position.
In order to provide a stronger financial base, increasing headroom and
flexibility in relation to banking covenants and ongoing funding requirements,
the Company raised GBP27.5m through a Placing in January 2010.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements. There were no material changes in the Group's
approach to capital management during the year ended 31 December 2009 or during
the previous year.
Financial risk management
The Board and Senior Executive team identify and evaluate risks and
uncertainties covered by the Group Business Plan and design controls to mitigate
these. Most of the financial risks faced by the Group at the date of approval
of these financial statements emanate from the volatility of financial markets,
the resultant reduction in supply of credit and its significant increase in
cost. These risks fall into a number of categories, all of which have been
proactively managed by the Board in the past and even more significantly in the
current economic climate.
The Group's funding financial risk centres on the total interest cost incurred
on the Group's short and medium term loans, which at 31 December 2009 totalled
GBP376m. The Board has swapped GBP281m of these funds into fixed rates and
retained GBP65m at floating rates due to the relatively low level of current
interest rates. The balance of GBP30m represents fixed rate facilities. The
Board reviews this policy on a regular basis to ensure good management of the
Group's exposure to interest rate fluctuations.
The principal financial controls that are in operation across the Group are as
follows:-
· The assessment of risk and the improvement of returns therefrom. The
Board is responsible for identifying business risks affecting the Group, and for
assessing the likelihood of their impact. The Board's approach to risk
management and internal control aims to assist the Group in meeting the
challenge of balancing commercial success with cost efficiency. This is managed
by the Executive Directors through regular and formal decision making processes
for each major operating business within the Group. The Board identifies key
business risks and manages these in accordance with the Group's Business Plans.
· In-depth capital expenditure appraisals. The Group has defined
guidelines for capital expenditure. Before investing in any major property
asset, assessments of maximum capital expenditure, maximum cash requirements,
forecast levels of profitability to be derived from the investment and risk
profile of the asset to be acquired are quantified and analysed by the Executive
Directors. Where actual results are materially different from those previously
forecast, remedial action is taken, which may if necessary involve the early
disposal of the asset concerned or cancellation of the proposal prior to further
cost being incurred.
· Financial management and results. Monthly budgets and annual
forecasts are prepared for each operating business of the Group, against which
actual results are monitored and controlled by the Executive Directors. Where
variances arise, these are investigated, business initiatives are implemented
and process changes made to improve performance.
· Control of the Group's cash requirements. Rolling 18 month forward
cash flow forecasts are prepared by Senior Executives of each of the Group's
three operating businesses. These are reviewed by the Board prior to
commencement of each financial year, and are regularly reviewed and contrasted
during each year.
· Group financial reporting. Detailed reports are provided to all
members of the Board. These reports provide full analyses of monthly, quarterly
and year to date financial performance, asset allocation, growth expectations
and related KPI based information for each operating business in the Group, with
comparison against budgets and prior year results. These appraisals enable the
Board to ensure that control within pre-determined levels of performance of each
operating business is achieved, both financially and operationally. Where this
is not being achieved, appropriate financial decisions are implemented to enable
results achieved to be close to those originally forecast.
Liquidity risk
The Board's approach to managing liquidity is to ensure, as far as possible,
that the Group will always have sufficient funds to meet its liabilities as they
fall due, without incurring unacceptable losses or risking damage to the Group's
reputation in its business sectors. The Group uses detailed divisional cash
flow reporting to assist the Board in monitoring cash flow requirements and
optimising cash returns on investments across the whole Group. The Group
typically ensures it has sufficient forecast cash and available facilities to
meet expected cash outflows for a forward period of 18 months. The Group meets
its day to day working capital requirements through cash generated in its
operating businesses, Liberty, Malmaison and Hotel du Vin, and Business
Exchange, and from its loan and overdraft facilities. The Group's facilities
include interest cover and gearing covenants with which the Group is in
compliance at 31 December 2009. Based on the detailed forecasts prepared for
each division, the Group is forecast to comply with the covenants in the
facilities for the period covered by these projections.
Market risk
Market risk that affects the Group is the risk that changes in market prices,
such as interest rates, foreign currency rates and equity prices, will affect
the Group's income or the value of its holdings of financial instruments. The
objective of the Group's market risk management is to manage and control market
risk exposures within acceptable parameters, while seeking to optimise returns
to shareholders.
The Group buys and sells derivatives for its financial liabilities, and also
incurs financial liabilities, in order to manage market risks.
The Group enters into commodity contracts only to meet the Group's expected
future usage and sale requirements. These principally occur in the Group's
Malmaison and Hotel du Vin business and in Liberty Plc.
The primary goal of the Group's available-for-sale equity securities investment
strategy is to maximise investment returns commensurate with acceptable levels
of risk, in order to meet as much as possible the Group's defined scheme pension
obligations. Management is assisted in this regard by professional external
advisors.
Interest rate risk
The Group's fixed rate borrowings are exposed to a risk of change in their fair
value due to changes in interest rates. The Group's variable rate borrowings
are exposed to a risk of change in cash flows due to changes in interest rates.
Investments in short-term receivables and payables are not exposed to interest
rate risk.
The Group's policy of managing its exposure to changes in interest rates is
generally achieved by entering into interest rate swaps or fixed rate contracts
with financially secure counter-parties denominated in Sterling, where
considered appropriate by the Board. The Group seeks to apply hedge accounting
in order to obtain cash flow certainty and does not enter into hedge contracts
on a speculative or trading basis. In addition, various financial amounts - for
example trade debtors and trade creditors - arise directly from the Group's
normal trading operations.
Disclosures have been made below in respect of current and long term financial
liabilities of the Group. These are expressed in total and by reference to the
associated financial instruments used to manage the interest rate exposures
arising therefrom. The Group is not required to account for fixed rate
financial assets and liabilities at fair value through the Income Statement.
Where the Group has entered into derivatives that qualify for hedge accounting
such as interest rate swaps, changes in the fair value of such instruments are
recognised through equity.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at 31 December 2009 would have
been charged/(credited) directly to the Income Statement or through equity
reserves by the amounts shown below. This analysis, before tax, assumes that
all other variables, in particular foreign currency rates, remain constant.
+------------------------------------+----------+----------+----------+----------+
| | Income | Equity |
| | Statement | |
+------------------------------------+---------------------+---------------------+
| | 100 | 100 bp | 100 | 100 bp |
| | bp | Decrease | bp | Decrease |
| | Increase | GBP'000 | Increase | GBP'000 |
| | GBP'000 | | GBP'000 | |
+------------------------------------+----------+----------+----------+----------+
| 31 December 2009 | | | | |
+------------------------------------+----------+----------+----------+----------+
| Variable rate instruments | (650) | 650 | | |
| | | | - | - |
+------------------------------------+----------+----------+----------+----------+
| Cash flow sensitivity (net) | (650) | 650 | | |
| | | | - | - |
+------------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------------+----------+----------+----------+----------+
| 31 December 2008 | | | | |
+------------------------------------+----------+----------+----------+----------+
| Variable rate instruments | (1,064) | 1,064 | | |
| | | | - | - |
+------------------------------------+----------+----------+----------+----------+
| Cash flow sensitivity (net) | (1,064) | 1,064 | | |
| | | | - | - |
+------------------------------------+----------+----------+----------+----------+
Currency risk
The Group is currently only exposed to currency risk on sales and purchases that
are denominated in Japanese Yen. Total sales in Yen amounted to GBP10m for the
year ended 31 December 2009 (2008: GBP7m), amounting to only 4% (2008: 3%) of
the total revenue for the year. All other Group revenue is denominated in
Sterling, the Group's functional currency. The Group uses forward exchange
contracts to hedge its currency risk, most of which have a maturity of less than
one year from the balance sheet date. The Group does not have any loans taken
out by any Group entities, in any currency other than Sterling.
In respect of other monetary assets and liabilities denominated in foreign
currencies, the Group ensures that its net exposure is kept to an acceptable
level by buying or selling foreign currencies at spot rates when necessary to
address short-term imbalances.
As over 99% of the Group's gross assets are denominated in Sterling, the Group
did not have a material exposure to foreign currency risk at 31 December 2009 or
at the previous year end. The remaining 1% of Group assets are denominated in
Japanese Yen. Accordingly, a 10% strengthening of Sterling against the Yen
would not have had a material effect on the Group at 31 December 2009 or at the
previous year end.
Credit risk
Credit risk for the Group arises if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Group's exposure to
credit risk is influenced mainly by the individual characteristics of each
customer. The Board considers there is not a material risk attached to the
customer base of the Group's businesses. This is because the customer base is
intrinsically diversified and management ensures the business has a broad spread
of customers at each of the Group's locations. No single customer accounts for
more than 1% of Group revenue.
The three principal operating divisions of the Group have established credit
policies for dealing with new customers, their creditworthiness and their
payment and delivery terms. The Group's review includes external ratings when
available, and in some cases bank references. Purchase limits are established
for each customer, which represent the maximum open amount that may be permitted
in the day-to-day operations of the Group without requiring prior approval from
a member of Middle or Senior Management. Customers that fail to meet the
Group's benchmark creditworthiness level may still transact with the Group but
on a restricted basis and generally only on a prepayment basis.
Customers that are graded as high risk are placed on a restricted customer list,
and future sales are only made on a restricted basis. In the Group's Business
Centre operations, customers are generally required to deposit two months'
licence fee at the commencement of the licence. In other areas of the Group,
collateral is not required in respect of trade and other receivables.
Exposure to credit risk
The carrying amount of financial assets represents their maximum credit exposure
to the Group, which at 31 December 2009 was as follows:-
+---------------------------------------+------+-------------+----------+
| | | 31 December | 31 |
| | | 2009 | December |
| | | | 2008 |
+---------------------------------------+------+-------------+----------+
| |Note | GBP'000 | GBP'000 |
+---------------------------------------+------+-------------+----------+
| Trade and other receivables | 16 | 34,413 | 38,337 |
+---------------------------------------+------+-------------+----------+
| Cash and cash equivalents | 17 | 19,655 | 32,036 |
+---------------------------------------+------+-------------+----------+
| Forward exchange contracts used for | | | |
| hedging | | | |
+---------------------------------------+------+-------------+----------+
| liabilities | 21 | - | 341 |
+---------------------------------------+------+-------------+----------+
| | | 54,068 | 70,714 |
+---------------------------------------+------+-------------+----------+
The carrying amount of the maximum exposure to credit risk for financial assets
of the Group at 31 December 2009, by division, was as follows:-
+----------------------------------------------+------------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+----------------------------------------------+------------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+------------+----------+
| Malmaison and Hotel du Vin | 13,433 | 9,793 |
+----------------------------------------------+------------+----------+
| MWB Business Exchange Plc | 26,345 | 43,846 |
+----------------------------------------------+------------+----------+
| Liberty Plc | 11,487 | 12,375 |
+----------------------------------------------+------------+----------+
| Central | 2,803 | 4,700 |
+----------------------------------------------+------------+----------+
| | 54,068 | 70,714 |
+----------------------------------------------+------------+----------+
No customer of the Group comprised more than 2% of the carrying amount of Group
trade receivables at 31 December 2009 (2008: 2%).
The ageing of trade receivables at 31 December 2009 was as follows:-
+-----------------------+-----------+------------+-----------+------------+
| | Gross | Impairment | Gross | Impairment |
| | 31 | provision | 31 | provision |
| | December | 31 | December | 31 |
| | 2009 | December | 2008 | December |
| | | 2009 | | 2008 |
+-----------------------+-----------+------------+-----------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+-----------+------------+-----------+------------+
| Not overdue | 6,533 | - | 6,266 | - |
+-----------------------+-----------+------------+-----------+------------+
| 1-30 days overdue | 3,282 | (184) | 2,463 | - |
+-----------------------+-----------+------------+-----------+------------+
| 31-120 days overdue | 2,955 | (487) | 4,036 | (501) |
+-----------------------+-----------+------------+-----------+------------+
| 120 days to one year | 570 | (128) | 658 | (359) |
| overdue | | | | |
+-----------------------+-----------+------------+-----------+------------+
| More than one year | 190 | (165) | 94 | (54) |
| overdue | | | | |
+-----------------------+-----------+------------+-----------+------------+
| | 13,530 | (964) | 13,517 | (914) |
+-----------------------+-----------+------------+-----------+------------+
The Group holds cash deposits as security for indebtedness from the majority of
its clients in the Business Exchange division of the Group. These are utilised,
where appropriate, to offset the charge to the Income Statement that would
otherwise occur from provisions for impairment referred to above. Based on
historic default rates, the Board believes that no material amount of impairment
allowance is necessary in addition to that provided above in respect of trade
receivables more than 30 days due; the majority of the unprovided balance
relates to customers that have good financial track records with the Group.
The movement on the impairment provision during the year was as follows:-
+----------------------------------------------+------------+----------+
| | Year ended | Year |
| | 31 | ended |
| | December | 31 |
| | 2009 | December |
| | | 2008 |
+----------------------------------------------+------------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+------------+----------+
| Opening provision | (914) | (997) |
+----------------------------------------------+------------+----------+
| Amounts provided | (693) | (935) |
+----------------------------------------------+------------+----------+
| Amounts utilised | 643 | 1,018 |
+----------------------------------------------+------------+----------+
| Closing provision | (964) | (914) |
+----------------------------------------------+------------+----------+
Determination of fair values
The following tables show the carrying amounts and fair values of the Group's
financial instruments at 31 December 2009 and at the previous year end. The
carrying amounts are included in the Group balance sheet, with the exception of
derivative financial instruments held to manage interest rate exposure, where
only a notional value and its fair value are appropriate. The fair values of
the financial instruments are the amounts at which the instruments could be
exchanged in a current transaction between willing parties. The fair value of
all other financial instruments is not materially different from the carrying
amounts because they incur interest at variable rates.
The fair value of the Group's loan stock has been estimated on the basis of
quoted market prices for similar issues with similar maturities, and on
calculations of the present value of future cash flows using the appropriate
discount rates prevailing at 31 December 2009. The fair values of other
financial instruments reflect the replacement values of the financial
instruments used to manage the Group's exposure to adverse interest rate
movements.
The carrying amounts of financial assets and liabilities, together with their
fair values at 31 December 2009 and at the previous year end, were as follows:-
+---------------------------------+-------------+------------+------------+------------+
| | 31 December 2009 | 31 December |
| | | 2008 |
+---------------------------------+--------------------------+-------------------------+
| | Carrying | Fair | Carrying | Fair |
| | amount | value | amount | value |
+---------------------------------+-------------+------------+------------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+-------------+------------+------------+------------+
| Trade and other receivables | 16,144 | 16,144 | 17,147 | 17,147 |
+---------------------------------+-------------+------------+------------+------------+
| Net cash and cash equivalents | 19,655 | 19,655 | 32,036 | 32,036 |
+---------------------------------+-------------+------------+------------+------------+
| Forward exchange contracts used | | | | |
| for hedging | | | | |
+---------------------------------+-------------+------------+------------+------------+
| liabilities | - | - | 341 | - |
+---------------------------------+-------------+------------+------------+------------+
| Financial derivative | (5,526) | (5,526) | (2,235) | (2,235) |
| instruments | | | | |
+---------------------------------+-------------+------------+------------+------------+
| Secured bank loans | (346,004) | (349,030) | (356,461) | (356,461) |
+---------------------------------+-------------+------------+------------+------------+
| Unsecured loan stock | (30,000) | (31,619) | (29,927) | (31,543) |
+---------------------------------+-------------+------------+------------+------------+
| Other unsecured loans | - | - | (805) | (810) |
+---------------------------------+-------------+------------+------------+------------+
| Long leasehold obligations | (697) | (697) | (699) | (699) |
+---------------------------------+-------------+------------+------------+------------+
| Trade and other payables | (67,796) | (67,796) | (54,355) | (54,355) |
+---------------------------------+-------------+------------+------------+------------+
| | (414,224) | (418,869) | (394,958) | (396,920) |
+---------------------------------+-------------+------------+------------+------------+
Liquidity risk and hedge profile
The maturity profile of the Group's financial liabilities is set out below:-
+---------------------------------------+--+------+----+-------+------------+-----------+----------+------------+
| | | Contractual cash | | | |
| | | flows | | | |
+------------------------------------------+-----------+--------------------+-----------+----------+------------+
| | Within | Between | Between | After | | Carrying |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | one | one and | two and | more than | | amount |
| | year | | | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | or on | two | five | five | | liability/ |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | demand | years | years | years | Total | (asset) |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| 31 December 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Non-derivative financial liabilities | | | | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Secured bank loans | 5,000 | 344,030 | - | - | 349,030 | 346,004 |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Unsecured Loan Stock | 7,500 | - | 22,500 | - | 30,000 | 30,000 |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Other loan borrowings | - | - | - | - | - | - |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Long leasehold obligations | - | - | - | 697 | 697 | 697 |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Trade and other payables | 67,211 | 585 | | - | 67,796 | 67,796 |
| | | | - | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Total non-derivative financial | 79,711 | 344,615 | 22,500 | 697 | 447,523 | 444,497 |
| liabilities | | | | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | | | | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Derivative financial liabilities | | | | | | |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| Forward contracts used for hedging | | | | - | | |
| liabilities | - | - | - | | - | - |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | 79,711 | 344,615 | 22,500 | 697 | 447,523 | 444,497 |
+---------------------------------------+---------+------------+------------+-----------+----------+------------+
| | | | | | | | | |
+---------------------------------------+--+------+----+-------+------------+-----------+----------+------------+
+---------------------------------------+----+------+---+-------+------------+-----------+-----------+--------------+
| | | Contractual cash | | | |
| | | flows | | | |
+--------------------------------------------+----------+--------------------+-----------+-----------+--------------+
| | Within | Between | Between | After | | Carrying |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | one | one and | two and | more than | | amount |
| | year | | | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | or on | two | five | five | | liability/ |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | demand | years | years | years | Total | (asset) |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| 31 December 2008 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Non-derivative financial liabilities | | | | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Secured bank loans | 341,828 | 14,633 | - | - | 356,461 | 356,461 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Unsecured Loan Stock | - | - | 29,927 | - | 29,927 | 29,927 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Other loan borrowings | 805 | - | - | - | 805 | 805 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Long leasehold obligations | - | - | - | 699 | 699 | 699 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Trade and other payables | 53,759 | 596 | | - | 54,355 | 54,355 |
| | | | - | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Total non-derivative financial | 396,392 | 15,229 | 29,927 | 699 | 442,247 | 442,247 |
| liabilities | | | | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | | | | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Derivative financial liabilities | | | | | | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| Forward contracts used for hedging | | | | - | | (341) |
| liabilities | - | - | - | | - | |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | 396,392 | 15,229 | 29,927 | 699 | 442,247 | 441,906 |
+---------------------------------------+-----------+-----------+------------+-----------+-----------+--------------+
| | | | | | | | | |
+---------------------------------------+----+------+---+-------+------------+-----------+-----------+--------------+
Management of capital
The Group's objectives when managing capital are to safeguard the entity's
ability to continue as a going concern and fulfill its corporate objectives.
The Group manages the capital structure and makes adjustments to it in light of
changes in economic conditions, the risk characteristics of the underlying
assets and its corporate strategy. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares, or sell assets to reduce debt.
Consistent with others in the property sector the Group monitors capital on the
basis of the debt-to-adjusted capital ratio. This ratio is calculated as net
debt divided by adjusted capital. Net debt is calculated as total debt (as
shown in the balance sheet) less cash and cash equivalents. Adjusted capital
comprises all components of equity (ie share capital, share premium, minority
interest, retained earnings, and revaluation surplus) other than amounts
recognised in equity relating to cash flow hedges.
The Group's strategy during 2009, which was unchanged from 2008, has been to
maintain the debt-to-adjusted capital ratio in the range of 1.0 to 2.0, in order
to reasonably protect shareholder interests and for the Group to be able to
access finance at reasonable cost. The debt-to-adjusted capital ratios at 31
December 2009 and at 31 December 2008 were as follows:-
+----------------------------------------------+-----------+-----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+----------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+----------------------------------------------+-----------+-----------+
| Total debt at year end | 383 | 390 |
+----------------------------------------------+-----------+-----------+
| Less cash and cash equivalents at year end | (20) | (32) |
+----------------------------------------------+-----------+-----------+
| Net debt at year end | 363 | 358 |
+----------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------+-----------+-----------+
| Total equity at year end | 176 | 204 |
+----------------------------------------------+-----------+-----------+
| Plus amounts recognised in equity relating | 3 | 2 |
| to cash flow hedges | | |
+----------------------------------------------+-----------+-----------+
| Adjusted capital at year end | 179 | 206 |
+----------------------------------------------+-----------+-----------+
| | | |
+----------------------------------------------+-----------+-----------+
| Net debt to adjusted capital ratio at year | 2.0 | 1.7 |
| end | | |
+----------------------------------------------+-----------+-----------+
The increase in the debt to adjusted capital ratio during 2009 resulted
primarily from the proportionately greater decrease in value of Group property
and other assets compared to the increase in net debt.
14. DEFERRED TAXATION
The deferred taxation liabilities/(assets) at 31 December 2009 and at the
previous year end arose as follows:-
+-------------------------------------+-----------+-----------+-----------+
| | 31 December 2009 |
+-------------------------------------+-----------------------------------+
| | Total | Provided | Not |
| | GBP'000 | GBP'000 | provided |
| | | | GBP'000 |
+-------------------------------------+-----------+-----------+-----------+
| Accelerated capital allowances | (8,425) | (1,205) | (7,220) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Trading tax losses | (24,587) | (8,579) | (16,008) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Unrelieved capital expenditure and | | | |
| interest | | | |
+-------------------------------------+-----------+-----------+-----------+
| payments | (23,312) | (5,944) | (17,368) |
+-------------------------------------+-----------+-----------+-----------+
| Total deferred tax assets | (56,324) | (15,728) | (40,596) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Short term timing differences | 878 | 878 | - |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Deferred tax (credit)/liability | | | |
| arising from potential | | | |
+-------------------------------------+-----------+-----------+-----------+
| tax payable on valuation | (5,649) | 4,308 | (9,957) |
| surpluses | | | |
+-------------------------------------+-----------+-----------+-----------+
| Total net deferred tax assets | (61,095) | (10,542) | (50,553) |
+-------------------------------------+-----------+-----------+-----------+
+-------------------------------------+-----------+-----------+-----------+
| | 31 December 2008 |
+-------------------------------------+-----------------------------------+
| | Total | Provided | Not |
| | GBP'000 | GBP'000 | provided |
| | | | GBP'000 |
+-------------------------------------+-----------+-----------+-----------+
| Accelerated capital allowances | (6,823) | (221) | (6,602) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Trading tax losses | (19,859) | (10,204) | (9,655) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Unrelieved capital expenditure and | | | |
| interest | | | |
+-------------------------------------+-----------+-----------+-----------+
| payments | (29,622) | (5,477) | (24,145) |
+-------------------------------------+-----------+-----------+-----------+
| Total deferred tax assets | (56,304) | (15,902) | (40,402) |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Short term timing differences | 884 | 884 | - |
+-------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------+-----------+-----------+-----------+
| Deferred tax (credit)/liability | | | |
| arising from potential | | | |
+-------------------------------------+-----------+-----------+-----------+
| tax payable on valuation | (3,950) | 4,518 | (8,468) |
| surpluses | | | |
+-------------------------------------+-----------+-----------+-----------+
| Total net deferred tax assets | (59,370) | (10,500) | (48,870) |
+-------------------------------------+-----------+-----------+-----------+
Deferred tax assets and liabilities provided
At 31 December 2009, the Group had accelerated capital allowances, trading tax
losses and interest payments from current and prior periods amounting to
GBP56,171,000 (2008: GBP56,793,000) that it expects to be available to reduce
future tax liabilities likely to arise in the Group. At 31 December 2009, these
exceed brand valuation surpluses and short term timing differences totalling
GBP18,521,000. The excess of GBP37,650,000 has been recognised at the
prevailing tax rate of 28% (2008: 28%) in the net deferred tax asset at the year
end of GBP10,542,000 (2008: GBP10,500,000).
Deferred tax assets and liabilities not provided
In addition, the Group has accelerated capital allowances, trading tax losses,
capital losses and unrelieved capital expenditure totalling GBP154,792,000
(2008: GBP149,361,000) that are not expected to be capable of utilisation in the
foreseeable future. Also, certain capital losses in the wider MWB Group
totalling GBP25,754,000 (2008: GBP25,175,000) are restricted in their use and
are not expected to be readily realisable. These tax assets totalling
GBP180,546,000 (2008: GBP174,536,000), recognised at the prevailing tax rate of
28% (2008: 28%), form the deferred tax asset not provided of GBP50,553,000
disclosed above.
15. MINORITY INTERESTS
The movements in minority interests of the Group during the year ended 31
December 2009 arose as follows:-
+---------------------------+---------+----------+-----------+-----------+----------+
| | | | Add | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | | Add | minority | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | | minority | share | Other | |
| | | | of | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | At | share | valuation | movements | At |
| | | of | | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | 1 | result | deficit | during | 31 |
| | January | for | for | | December |
+---------------------------+---------+----------+-----------+-----------+----------+
| | 2009 | the | the | the | 2009 |
| | | year | year | year | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------+---------+----------+-----------+-----------+----------+
| MWB Business Exchange Plc | 11,314 | 418 | - | (4,890) | 6,842 |
+---------------------------+---------+----------+-----------+-----------+----------+
| MWB Malmaison Holdings | 54,530 | 965 | (540) | (490) | 54,465 |
| Limited | | | | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| Liberty Plc | 10,369 | (1,560) | 300 | (339) | 8,770 |
+---------------------------+---------+----------+-----------+-----------+----------+
| Others | 1,705 | 48 | | (117) | 1,636 |
| | | | - | | |
+---------------------------+---------+----------+-----------+-----------+----------+
| | 77,918 | (129) | (240) | (5,836) | 71,713 |
+---------------------------+---------+----------+-----------+-----------+----------+
16. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY IN PENCE PER SHARE
The Equity attributable to shareholders of MWB Group Holdings in pence per share
is calculated by dividing the Equity attributable to shareholders of MWB Group
Holdings at each year end by the number of ordinary shares in issue at such
date. The relevant figures are as follows:-
+--------------------------------------+---------+----------+------------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+--------------------------------------+---------+----------+------------+
| Equity attributable to shareholders | | | |
| of | | | |
+--------------------------------------+---------+----------+------------+
| MWB Group Holdings per | | | |
| Consolidated | | | |
+--------------------------------------+---------+----------+------------+
| Statement of Financial Position | GBP'000 | 104,536 | 125,881 |
+--------------------------------------+---------+----------+------------+
| | | | |
+--------------------------------------+---------+----------+------------+
| Number of ordinary shares in issue | '000 | 72,371 | 72,371 |
| at year end | | | |
+--------------------------------------+---------+----------+------------+
| | | | |
+--------------------------------------+---------+----------+------------+
| Equity attributable to shareholders | | | |
| of MWB | | | |
+--------------------------------------+---------+----------+------------+
| Group Holdings in pence per share | Pence | | 174p |
| | | 144p | |
+--------------------------------------+---------+----------+------------+
17. RELATED PARTY BALANCES AND TRANSACTIONS
Arrangements with ServCo Limited Partnership
(i) Background
In March 2002, the Company entered into a services agreement (the "Services
Agreement") with ServCo Limited Partnership ('ServCo'), an entity controlled by
the Executive Directors, which was approved by Independent Shareholders at an
extraordinary general meeting of the Company held in May 2002. This agreement
governs the relationship between the Company on behalf of the Group and ServCo
in relation to the provision of administrative, operational and head office
outsourced services by ServCo to the Group.
Under the Services Agreement, the Company on behalf of the Group pays management
fees and rental payments at agreed levels but subject to adjustment as agreed
between the Company and ServCo (or in default of agreement, by an expert
appointed in accordance with the dispute resolution mechanism contained in the
Services Agreement) for any increase or decrease in the cost to ServCo of
providing services to the Group. These fees represent the salary and head
office costs directly incurred by the Group prior to approval of the Services
Agreement by Independent Shareholders in May 2002, that are now incurred
directly by ServCo and recharged to the Group in accordance with these approved
arrangements.
A Share Transfer Agreement relating to the acquisition by ServCo of Marylebone
Warwick Balfour Management Limited was approved by Independent Shareholders at
the same extraordinary general meeting in May 2002. As a result, certain
contractual obligations that existed between Marylebone Warwick Balfour
Management Limited (which was previously owned by the Group) and the Group
continue to subsist after that share transfer agreement and are charged to the
Group, in a similar manner as they did prior to completion of the share transfer
agreement.
(ii) Fees paid during year ended 31 December 2009
In accordance with the Services Agreement and Share Transfer Agreement referred
to above, the Group paid management fees of GBP2.4m and rental payments of
GBP0.5m to ServCo during the year ended 31 December 2009 (year ended 31 December
2008: GBP3.9m). The fees payable to ServCo under the Services Agreement are not
remuneration payable to the Directors.
In accordance with the service contracts between the Executive Directors and the
Company, annual salaries of the Executive Directors, plus associated national
insurance, travel allowance, bonus and pension contributions, in all totalling
GBP1.4m (2008: GBP1.6m) were paid to ServCo, rather than to the Executive
Directors themselves. In addition, the salary of one Senior Executive of the
Company (who is also a partner of ServCo) of GBP0.2m (2008: GBP0.2m) plus
associated national insurance and pension contributions, was paid to ServCo
rather than to the Senior Executive concerned. The payment of these salaries
and associated costs to ServCo, rather than to the individuals concerned,
results in no additional cost being incurred by the Group.
No amounts were outstanding either to or from ServCo at 31 December 2009 or at
the previous year end and no amounts were written off in respect of any such
balances during either year.
Arrangements with Alternative Hotel Group Limited
The Group has occupied head office premises at 1 West Garden Place, Kendal
Street, London W2 for many years. As a result of implementation of the Cash
Distribution Programme in 2002 and the sale of Group assets to return cash to
shareholders that has been achieved therefrom, surplus space became available at
these offices. During the year ended 31 December 2008, the Board assessed the
market value of this space once it had become available and licenced it at
market value to companies in the AHG Management Services Limited group of
companies ("AHG").
Richard Balfour-Lynn, the Chief Executive of MWB, Michael Bibring and the wife
of Jagtar Singh, are shareholders in and directors of AHG which has a 50%
shareholding in a company which operates a private residential hotel conference
business, carried on from rural properties situated outside the M25 and not in
city locations. None of these Directors are involved in the day to day
management of such business and the business has an independent management team.
The Board considers that such holdings do not conflict with the duties of such
individuals as Directors of MWB Group Holdings Plc. The Board also considers
that such a residential conference business does not compete with either the
meeting and conference rooms business of Business Exchange which only operates
in city locations and does not offer residential hotel facilities, or the hotel
business of Malmaison and Hotel du Vin which operates in city locations and does
not focus on offering conference facilities as a core service. The Board also
considers that the hotel businesses owned by AHG do not compete with the
business of Malmaison and Hotel du Vin, as they have distinct offerings which
are targeted at a different consumer base. Malmaison and Hotel du Vin focuses
on branded boutique hotels in city locations with an emphasis on a high quality
food, beverage and accommodation offering. In contrast AHG owns larger hotels
predominantly located in non urban locations while its hotels in urban locations
focus on providing conferencing facilities.
During the year ended 31 December 2009, the Group charged GBP0.3m (2008:
GBP0.3m) to AHG in respect of the licensed office space referred to above. No
amounts were outstanding either to or from AHG at 31 December 2009 and no
amounts were written off in respect of any such balances during the year.
Cash held on behalf of employees in relation to Placing in January 2010
At 31 December 2009, the Company held GBP2.3m in its bank account which
represented monies forwarded by employees, including Directors, in anticipation
of the Placing that took place in January 2010. These monies have not been
included in the Group or Company statement of financial position at 31 December
2009, as they belonged fully to the relevant individuals and were deposited with
the Company in trust on behalf of the employees solely to simplify the
administration of the collection of the relevant employee placing subscriptions.
The cash in the bank account was matched by a payable of an equal amount, also
not reported in either the Group or Company statement of financial position as
reported in these financial statements. At the date of publication of these
financial statements, these monies had been passed in full to the issuing house
in relation to the Placing which completed on 11 January 2010.
18. POST BALANCE SHEET EVENT
On 11 January 2010, the Company raised GBP27.5m through the issue of 91,666,667
New Units at 30 pence each. As a result, Units in issue after the Placing at
the date of these financial statements amounted to 164,038,149. These monies
had been raised in order to provide the Company with a stronger financial base
increasing headroom and flexibility in relation to banking covenants and ongoing
funding requirements.
The monies raised were applied as follows: the cancellation of GBP7.5m of
Unsecured Loan Stock, transaction fees of GBP2.9m, termination payments
amounting to GBP1.65m to Andrew Blurton, the former Joint Finance Director, the
repayment of a GBP4.0m intra-group loan from MWB Business Exchange, with the
remaining balance of GBP11.4m being available for working capital and bank loan
repayment.
On 12 March 2010, Liberty exchanged contracts for the sale and leaseback of its
freehold property, the Tudor building, for GBP41.5m. Completion of this
disposal is subject to shareholder approval and the Circular in relation thereto
will be sent to shareholders in April 2010.
19. FINANCIAL STATEMENTS
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 December 2009 or 2008.
The Group statutory accounts for the financial year 2008 have been reported on
by the Group's auditor and delivered to the registrar of companies. The report
of the auditors was unqualified and did not contain statements under section
237(2) or (3) of the Companies Act 1985, but was modified to include an emphasis
of matter paragraph which drew attention to note 1 to the financial statements
of year ended 31 December 2008, which indicated the existence of a material
uncertainty that may cast significant doubt on the Group's ability to continue
as a going concern.
The financial statements for 2009 will be delivered to the registrar of
companies in due course. The auditors have reported on those accounts; their
report was (i) unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
PROFORMA STATEMENT OF NET ASSETS (UNAUDITED)
The following unaudited proforma statement of net assets is based on the
financial position of the Group at 31 December 2009, adjusted to illustrate the
estimated proforma effects of the Placing which completed in January 2010 and
the sale and leaseback of the Liberty freehold property for which contracts were
exchanged on 15 March 2010, as if these events had taken effect on 31 December
2009.
The unaudited proforma statement of net assets has been prepared for
illustrative purposes only and, because of its nature, the pro forma statement
addresses a hypothetical situation and, therefore, does not represent the
Group's actual financial position or results.
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | 31 | Adjustments | Proforma | Adjustments | Proforma |
| | December | relating to | 31 | relating to | 31 |
| | 2009 | Placing | December | property | December |
| | | | 2009 | disposal | 2009 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Non-current assets | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Intangible assets and | 28,794 | - | 28,794 | - | 28,794 |
| goodwill | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Operational properties | 499,414 | - | 499,414 | (26,208) | 473,206 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Operational properties | | | | | |
| in the course of | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Construction | 1,929 | - | 1,929 | - | 1,929 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Plant and equipment | 58,123 | - | 58,123 | (4,042) | 54,081 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Deferred tax asset | 10,542 | | 10,542 | | 10,542 |
| | | - | | - | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | 598,802 | | 598,802 | (30,250) | 518,552 |
| | | - | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Current assets | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Inventories | 14,306 | - | 14,306 | - | 14,306 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Trade and other | | | | | |
| receivables: | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Due after more than | 2,569 | - | 2,569 | - | 2,569 |
| one year | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Due within one year | 31,844 | - | 31,844 | - | 31,844 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Cash and cash | 19,655 | | 19,655 | 27,643 | 47,298 |
| equivalents | | - | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | 68,374 | | 68,374 | 27,643 | 96,017 |
| | | - | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Total assets | 667,176 | | 667,176 | (2,607) | 664,569 |
| | | - | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Current liabilities | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Loans and borrowings | (11,424) | 7,500 | (3,924) | - | (3,924) |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Derivative financial | (5,526) | - | (5,526) | - | (5,526) |
| instruments | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Trade and other | (86,988) | 1,650 | (85,338) | - | (85,338) |
| payables | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Tax payable | (393) | | (393) | | (393) |
| | | - | | - | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | (104,331) | 9,150 | (95,181) | | (95,181) |
| | | | | - | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Non-current | | | | | |
| liabilities | | | | | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Loans and borrowings | (364,580) | 15,450 | (349,130) | 12,542 | (336,588) |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Employee benefits | (2,814) | - | (2,814) | - | (2,814) |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Trade and other | (19,202) | | (19,202) | | (19,202) |
| payables | | - | | - | |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| | (386,596) | 15,450 | (371,146) | 12,542 | (358,604) |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Total liabilities | (490,927) | 24,600 | (466,327) | 12,542 | (453,785) |
+------------------------+--------------+-------------+--------------+-------------+--------------+
| Net assets | 176,249 | 24,600 | 200,849 | 9,935 | 210,784 |
+------------------------+--------------+-------------+--------------+-------------+--------------+
+------------------------+------------+-------------+-------------+-------------+-------------+
| | 31 | Adjustments | Proforma | Adjustments | Proforma |
| | December | relating to | 31 | relating to | 31 |
| | 2009 | Placing | December | property | December |
| | | | 2009 | disposal | 2009 |
+------------------------+------------+-------------+-------------+-------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+------------+-------------+-------------+-------------+-------------+
| Shareholders' funds | 104,536 | 24,600 | 129,136 | 6,790 | 135,926 |
+------------------------+------------+-------------+-------------+-------------+-------------+
| Minority interests | 71,713 | | 71,713 | 3,145 | 74,858 |
| | | - | | | |
+------------------------+------------+-------------+-------------+-------------+-------------+
| Total equity | 176,249 | 24,600 | 200,849 | 9,935 | 210,784 |
+------------------------+------------+-------------+-------------+-------------+-------------+
| | | | | | |
+------------------------+------------+-------------+-------------+-------------+-------------+
| Equity Attributable to | | | | | |
| Shareholders | | | | | |
+------------------------+------------+-------------+-------------+-------------+-------------+
| in pence per Unit | 144p | | 79p | | |
| | | | | | 83p |
+------------------------+------------+-------------+-------------+-------------+-------------+
| | | | | | |
+------------------------+------------+-------------+-------------+-------------+-------------+
| Units in issue: | 72,371,482 | | 164,038,149 | | 164,038,149 |
+------------------------+------------+-------------+-------------+-------------+-------------+
Notes:
1. The gross proceeds of the Placing referred to above refer to the
issue by the Company of 91,666,667 New Units at a price of 30 pence per Unit on
11 January 2010, that raised gross proceeds of GBP27.5m, and increased the
enlarged issued share capital to 164,038,149 Units.
2. Costs of disposal of the Liberty property of GBP1,000,000 have been
deducted from the anticipated sales proceeds.
3. Save for the adjustment for the net proceeds of the Placing as
described in note 1 above and the sale and leaseback of the Liberty Tudor
Building , no adjustment has been made to reflect any trading or other
transactions undertaken by the Group since 31 December 2009.
Proforma impact on MWB's audited net profit for the year ended 31 December 2009
The impact on the audited Group loss after tax for the year ended 31 December
2009 on the basis that this was prepared as if the Placing and sale of the
Liberty Tudor Building had taken effect on 1 January 2009 would have been as
follows:-
1. Net finance costs would decrease reflect the reduction of debt
arising from the net proceeds of the Placing and the disposal of the Liberty
Tudor Building; and
2. Rental costs in Liberty would increase by GBP2.1m and depreciation
costs would reduce to reflect the sale and leaseback of the Liberty Tudor
Building.
3. The taxation charge would be adjusted in order to reflect the tax
effect of the reduction in finance costs and the increase in the rental costs.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Directors Report and the Group
and Parent Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and Parent Company financial
statements for each financial year. Under that law they are required to prepare
the Group financial statements in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the parent company financial
statements in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Parent Company and of their profit or loss for that period. In
preparing each of the Group and Parent Company financial statements, the
Directors are required to:
- Select suitable accounting policies and then apply them
consistently;
- Make judgments and estimates that are reasonable and prudent;
- For the group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
- For the Parent Company financial statements, state whether
applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the parent company financial statements;
and
- Prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the group and the parent company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
We the Directors of MWB Group Holdings Plc confirm that to the best of our
knowledge:
· the financial statements of the Group have been prepared in accordance
with IFRSs as adopted by the EU, and for the Company under UK GAAP, in
accordance with applicable United Kingdom law and give a true and fair view of
the assets, liabilities, financial position and profit of the Group; and
· the Report of the Directors includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that face the Group.
GROUP BUSINESS CENTRES at 31 December 2009
Contact details for all business centres operated by the Group:-
+--------------+------------+---------------------+------+--------------------+
| 4/5 star | Telephone: | Freephone 0808 100 | Web: | www.mwbex.com |
| offices | | 1800 | | |
+--------------+------------+---------------------+------+--------------------+
| 3 star | Telephone: | Freephone 0800 013 | Web: | www.cecoffices.com |
| offices | | 0355 | | |
+--------------+------------+---------------------+------+--------------------+
+----------------------------------+------------------------+--------------+
| Leased centres | Location | Number of |
| | | workstations |
+----------------------------------+------------------------+--------------+
| 43 Temple Row | Birmingham B2 5LS | 275 |
+----------------------------------+------------------------+--------------+
| Atrium Court, The Ring | Bracknell RG12 1BW | 464 |
+----------------------------------+------------------------+--------------+
| Lower Castle Street | Bristol BS1 3AG | 243 |
+----------------------------------+------------------------+--------------+
| Wellington House, East Road | Cambridge CB1 1BH | 172 |
+----------------------------------+------------------------+--------------+
| 9-10 St. Andrew Square | Edinburgh EH2 2AF | 352 |
+----------------------------------+------------------------+--------------+
| Westpoint, 4 Redheughs Rigg, | Edinburgh EH12 9DQ | 256 |
| South Gyle | | |
+----------------------------------+------------------------+--------------+
| Crossweys, 28-30 High Street | Guildford GU1 3EL | 171 |
+----------------------------------+------------------------+--------------+
| 1 Farnham Road | Guildford GU2 4RG | 299 |
+----------------------------------+------------------------+--------------+
| Craneshaw House, 8 Douglas Road | Hounslow TW3 1DA | 165 |
+----------------------------------+------------------------+--------------+
| Vantage House, 21-23 Wellington | Leeds LS1 4DE | 370 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 1 Whitehall, Whitehall Road | Leeds LS1 4HR | 411 |
+----------------------------------+------------------------+--------------+
| Liverpool Street, 55 Old Broad | London EC2M 1RX | 370 |
| Street | | |
+----------------------------------+------------------------+--------------+
| Providian House, 16-18 Monument | London EC3R 8AJ | 219 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 107-111 Fleet Street | London EC4A 2AB | 408 |
+----------------------------------+------------------------+--------------+
| 60 Cannon Street | London EC4N 6JP | 344 |
+----------------------------------+------------------------+--------------+
| Winchester House, 259-269 Old | London NW1 5RA | 375 |
| Marylebone Road | | |
+----------------------------------+------------------------+--------------+
| Alpha House, 100 Borough High | London SE1 1LB | 283 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 6 Hays Lane | London SE1 2QG | 255 |
+----------------------------------+------------------------+--------------+
| 10 Greycoat Place | London SW1P 1SB | 543 |
+----------------------------------+------------------------+--------------+
| Lasenby House, 32 Kingly Street | London W1B 5QQ | 256 |
+----------------------------------+------------------------+--------------+
| Liberty House, 222 Regent Street | London W1B 5TR | 297 |
+----------------------------------+------------------------+--------------+
| 77 Oxford Street | London W1D 2ES | 290 |
+----------------------------------+------------------------+--------------+
| 18 Soho Square | London W1D 3QL | 278 |
+----------------------------------+------------------------+--------------+
| 130 Shaftesbury Avenue | London W1D 5EU | 721 |
+----------------------------------+------------------------+--------------+
| Cobalt Building, 19-20 Noel | London W1F 8GW | 141 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 33 Cavendish Square | London W1G 0PW | 516 |
+----------------------------------+------------------------+--------------+
| Marble Arch Tower, 55 Bryanston | London W1H 7AA | 256 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 1 Berkeley Street | London W1J 8DJ | 357 |
+----------------------------------+------------------------+--------------+
| 85 Tottenham Court Road | London W1T 4DU | 360 |
+----------------------------------+------------------------+--------------+
| 83 Baker Street | London W1U 6LA | 347 |
+----------------------------------+------------------------+--------------+
| 26-28 Hammersmith Grove | London W6 7BA | 499 |
+----------------------------------+------------------------+--------------+
| 1a Hammersmith Broadway | London W6 9DL | 311 |
+----------------------------------+------------------------+--------------+
| 16-19 Southampton Place | London WC1A 2AJ | 200 |
+----------------------------------+------------------------+--------------+
| 4/4a Bloomsbury Square | London WC1A 2RP | 160 |
+----------------------------------+------------------------+--------------+
| 344-354 Gray's Inn Road | London WC1X 8BP | 313 |
+----------------------------------+------------------------+--------------+
| 88 Kingsway | London WC2B 6AA | 330 |
+----------------------------------+------------------------+--------------+
| Amadeus House, Floral Street | London WC2E 9DP | 264 |
+----------------------------------+------------------------+--------------+
| 25 Floral Street | London WC2E 9DS | 313 |
+----------------------------------+------------------------+--------------+
| 17-19 Bedford Street | London WC2E 9HP | 205 |
+----------------------------------+------------------------+--------------+
| 53-59 Chandos Place | London WC2N 4HS | 211 |
+----------------------------------+------------------------+--------------+
| Golden Cross House, 8 Duncannon | London WC2N 4JF | 500 |
| Street | | |
+----------------------------------+------------------------+--------------+
| Siena Court, The Broadway | Maidenhead SL6 1NJ | 175 |
+----------------------------------+------------------------+--------------+
| Trident One, Styal Road | Manchester M22 5XB | 328 |
+----------------------------------+------------------------+--------------+
| Exchange House, 494 Midsummer | Milton Keynes MK9 2EA | 260 |
| Boulevard | | |
+----------------------------------+------------------------+--------------+
| 15 Wheeler Gate | Nottingham NG1 2NA | 117 |
+----------------------------------+------------------------+--------------+
| John Eccles House, Robert | Oxford OX4 4GP | 124 |
| Robinson Avenue, Oxford Science | | |
| Park | | |
+----------------------------------+------------------------+--------------+
| Atlantic House, Imperial Way | Reading RG2 0TD | 363 |
+----------------------------------+------------------------+--------------+
| Parkshot House, 5 Kew Road | Richmond TW9 2PR | 442 |
+----------------------------------+------------------------+--------------+
| Centurion House, London Road | Staines TW18 4AX | 183 |
+----------------------------------+------------------------+--------------+
| Regal House, 70 London Road | Twickenham TW1 3QS | 135 |
+----------------------------------+------------------------+--------------+
| 50 leased centres at 31 December | | 15,227 |
| 2009 | | |
+----------------------------------+------------------------+--------------+
| | | |
+----------------------------------+------------------------+--------------+
| Operating and Management | Location | Number of |
| Agreement centres | | Workstations |
+----------------------------------+------------------------+--------------+
| Level 33, 25 Canada Square, | London E14 5LB | 270 |
| Canary Wharf | | |
+----------------------------------+------------------------+--------------+
| 27 Austin Friars | London EC2N 2QP | 104 |
+----------------------------------+------------------------+--------------+
| City Tower, 40 Basinghall Street | London EC2V 5DE | 220 |
+----------------------------------+------------------------+--------------+
| 133 Houndsditch | London EC3A 7AH | 327 |
+----------------------------------+------------------------+--------------+
| St. Clement's House, 27/28 | London EC4N 7AE | 416 |
| Clement's Lane | | |
+----------------------------------+------------------------+--------------+
| Westgate House, Westgate Road | London W5 1YY | 195 |
+----------------------------------+------------------------+--------------+
| Pall Mall Court, King Street | Manchester M2 4PD | 241 |
+----------------------------------+------------------------+--------------+
| Elizabeth House, Duke Street | Woking GU21 5AM | 62 |
+----------------------------------+------------------------+--------------+
| 8 Operating and Management | | 1,835 |
| Agreement | | |
| centres at 31 December 2009 | | |
+----------------------------------+------------------------+--------------+
| Management contract centres | Location | Number of |
| | | Workstations |
+----------------------------------+------------------------+--------------+
| Tower Point 44, North Road | Brighton BN1 1YR | 350 |
+----------------------------------+------------------------+--------------+
| Europa House, Barcroft Street | Bury BL9 5BT | 266 |
+----------------------------------+------------------------+--------------+
| Temple Court, Cathedral Road | Cardiff CF11 9HA | 164 |
+----------------------------------+------------------------+--------------+
| Castle Court, Cathedral Road | Cardiff CF11 9LJ | 103 |
+----------------------------------+------------------------+--------------+
| Copthall Bridge House, Station | Harrogate HG1 1SP | 177 |
| Bridge | | |
+----------------------------------+------------------------+--------------+
| Silk House Court, Tithebarn | Liverpool L2 2LZ | 114 |
| Street | | |
+----------------------------------+------------------------+--------------+
| 1 Sekforde Street, Clerkenwell | London EC1R 0BE | 213 |
+----------------------------------+------------------------+--------------+
| London Wall City Business Centre | London EC2M 5UU | 156 |
| 2 London Wall Buildings | | |
+----------------------------------+------------------------+--------------+
| 2 Finch Lane | London EC3V 3NA | 71 |
+----------------------------------+------------------------+--------------+
| 52 Grosvenor Gardens | London SW1W 0AU | 234 |
+----------------------------------+------------------------+--------------+
| 118 Piccadilly, Mayfair | London W1J 7NW | 102 |
+----------------------------------+------------------------+--------------+
| Cuthbert House, City Road, All | Newcastle-upon-Tyne | 192 |
| Saints | NE1 2ET | |
+----------------------------------+------------------------+--------------+
| Quorum Business Park, Benton | Newcastle-upon-Tyne | 390 |
| Lane | NE12 8BX | |
+----------------------------------+------------------------+--------------+
| Watson Chambers, Market Place | Sheffield S1 2GH | 156 |
+----------------------------------+------------------------+--------------+
| Provincial House, Solly Lane | Sheffield S1 4BB | 116 |
+----------------------------------+------------------------+--------------+
| | | |
+----------------------------------+------------------------+--------------+
| 15 management contract centres | | |
| at 31 December 2009 | | 2,804 |
+----------------------------------+------------------------+--------------+
| | | |
+----------------------------------+------------------------+--------------+
| Total | | |
+----------------------------------+------------------------+--------------+
| 73 centres at 31 December 2009 | | 19,866 |
+----------------------------------+------------------------+--------------+
MALMAISON AND HOTEL DU VIN HOTELS at 31 December 2009
+------------------------+-------------------------+----------+---------------+
| | | Number | Telephone |
| Malmaison | City | of | number |
| | | bedrooms | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 49-53 | Aberdeen AB15 4YP | 80 | 01224 327 370 |
| Queens Road | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 34-38 | Belfast BT1 3GH | 64 | 028 9022 0200 |
| Victoria Street | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, Mailbox, | | | |
+------------------------+-------------------------+----------+---------------+
| 1 Wharfside Street | Birmingham B1 1RD | 189 | 0121 246 5000 |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 1 Tower | Edinburgh EH6 7DZ | 100 | 0131 468 5000 |
| Place, Leith | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 278 West | Glasgow G2 4LL | 72 | 0141 572 1000 |
| George Street | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 1 Swinegate | Leeds LS1 4AG | 100 | 0113 398 1000 |
+------------------------+-------------------------+----------+---------------+
| Malmaison, William | | | |
| Jessop Way, | | | |
+------------------------+-------------------------+----------+---------------+
| Princes Dock | Liverpool L3 1QZ | 130 | 0151 229 5000 |
+------------------------+-------------------------+----------+---------------+
| Malmaison, | London EC1M 6AH | 97 | 020 7012 3700 |
| Charterhouse Square | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, Piccadilly | Manchester M1 3AQ | 167 | 0161 278 1000 |
+------------------------+-------------------------+----------+---------------+
| Malmaison, Quayside | Newcastle-upon-Tyne NE1 | 122 | 0191 245 5000 |
| | 3DX | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 3 Oxford | Oxford OX1 1AY | 94 | 01865 268 400 |
| Castle | | | |
+------------------------+-------------------------+----------+---------------+
| Malmaison, 18-20 | Reading, Berkshire RG1 | 75 | 0118 956 2300 |
| Station Road | 1JX | | |
+------------------------+-------------------------+----------+---------------+
| 12 operating Malmaison | | 1,290 | |
+------------------------+-------------------------+----------+---------------+
| | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Church | Birmingham B3 2NR | 66 | 0121 200 0600 |
| Street | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Ship | Brighton, Sussex BN1 | 49 | 01273 718 588 |
| Street | 1AD | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, The | | | |
| Sugar House, | | | |
+------------------------+-------------------------+----------+---------------+
| Narrow Lewins | Bristol BS1 2NU | 40 | 0117 925 5577 |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, 15-19 | | | |
| Trumpington | | | |
+------------------------+-------------------------+----------+---------------+
| Street | Cambridge CB2 1QA | 41 | 01223 227 330 |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Parabola | Cheltenham GL50 3AQ | 49 | 01242 588 450 |
| Road | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, 2 | Edinburgh EH1 1EZ | 47 | 0131 247 4900 |
| Forrest Road | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, One | | | |
| Devonshire | | | |
+------------------------+-------------------------+----------+---------------+
| Gardens | Glasgow G12 0UX | 49 | 0141 339 2001 |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Prospect | Harrogate HG1 1LB | 48 | 01423 856 800 |
| Place | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, New | Henley-on-Thames, Oxon | 43 | 01491 848 400 |
| Street | RG9 2BP | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, City | Newcastle-upon-Tyne NE1 | 42 | 0191 245 5000 |
| Road | 2BE | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Thames | Poole, Dorset BH15 1JN | 38 | 01202 785 570 |
| Street | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Crescent | Tunbridge Wells, Kent | 34 | 01892 526 455 |
| Road | TN1 2LY | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, | Winchester, Hampshire | 24 | 01962 841 414 |
| Southgate Street | SO23 9EF | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, 89 The | York YO24 1AX | 44 | 01904 557 350 |
| Mount | | | |
+------------------------+-------------------------+----------+---------------+
| 14 operating Hotel du | | 614 | |
| Vin | | | |
+------------------------+-------------------------+----------+---------------+
| 26 operating hotels | | 1,904 | |
+------------------------+-------------------------+----------+---------------+
| | | | |
+------------------------+-------------------------+----------+---------------+
| Current developments | | Number | |
| at | City | of | |
| 30 June 2009 | | bedrooms | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, 40 The | St. Andrews KY16 9AS | 21 | |
| Scores | | | |
+------------------------+-------------------------+----------+---------------+
| Hotel du Vin, Stour | Canterbury CT1 2ND | 44 | |
| Street | | | |
+------------------------+-------------------------+----------+---------------+
| 2 current developments | | 65 | |
+------------------------+-------------------------+----------+---------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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