RNS Number:7507W
Luminar PLC
17 May 2007
Luminar plc
Preliminary results for the year ended 1 March 2007
Progress on delivery of strategy, financials and roll-out
Luminar plc is the leading operator in the late night marketplace with over 120
venues of which Oceana, Lava & Ignite and Liquid are the key brands.
Highlights
Results
> Total sales from continuing operations up 5% to #204.0m (2006: #194.7m)
- Dancing Division + 7% sales growth
> EBITDA from continuing operations pre-exceptional items maintained at #54.8m
> Gross margins from continuing operations improved 70 basis points to 84.4%
> PBT: Total, pre-exceptional items, of #41.5m (2006: #45.6m)
Continuing operations, pre-exceptional items, of #26.7m (2006: #24.0m)
Continuing operations, post-exceptional items, of #18.4m (2006: #9.2m)
> EPS: Total operations of 50.4p per share (2006: 2.3p per share)
Continuing operations, pre-exceptional items, up 9% to 28.9p per
share (2006: 26.5p per share)
Continuing operations, post-exceptional items, up 32% to 20.7p per
share (2006: 15.7p per share)
> Improved financial effectiveness
- Full year dividend up 13% at 17.20p per share (2006: 15.18p per
share)
- Share buy-back programme commenced with #23m returned to
shareholders during the year
- Maintaining a return on investment of 25%
> A year of considerable progress in continuing towards Board's objective
of creating a focused business of 120 high quality venues by 2009:
- 12 branded openings completed before peak trading period
- Dancing admissions up 5%
- Central cost reductions ahead of plan, #2.6m delivered
- Disposal of the Entertainment Division and non-core clubs achieved
delivering #126m of value
- Strong pipeline with 10 to 12 new units planned for 2007/08
> Current trading: Branded dancing like-for-like sales up 7.3% in the
first 10 weeks
Stephen Thomas, Chief Executive, said:
"Excellent results have been driven by the encouraging performance of our
branded venues and a good second half."
"Following the disposal of the non-core businesses the Group is now totally
focused on delivering the roll-out of venues that have high returns. The Group
is well positioned to take advantage of its market leadership."
17 May 2007
Enquiries
Luminar plc
Stephen Thomas, Chief Executive (today) Tel: 020 7457 2020
Nick Beighton, Finance Director (thereafter) Tel: 0190 854 4100
College Hill
Matthew Smallwood Tel: 020 7457 2020
Introduction
The last year has seen Luminar culminate its shift in focus to operate venues
that are leaders in their own marketplaces as well as opening 12 units of its
own chosen brands: Oceana, Liquid and Lava & Ignite.
Luminar remains extremely cash generative and has embarked on a 3 year
programme, returning excess cash to shareholders.
Much progress has been made towards achieving our strategy of creating an
optimal business of 120 high quality venues by 2009. The Board is singularly
focused on delivering its clear plan and strives to consistently achieve high
returns for shareholders.
Our business and the market in which we operate
The Group operates in the late night market for entertaining, dancing and
drinking, largely through three branded concepts: Oceana, Lava & Ignite and
Liquid. The Group is the largest operator in its chosen market, with the
competition largely fragmented in much smaller groups and privately owned clubs.
The strategic focus of the Group has sharpened following the disposal of 98
entertainment and other non-core units. The portfolio at the year end consisted
of 122 units.
Our target consumers are in the 18-30 age range, with 41% of this group visiting
nightclubs more than once a month. The Group continues to monitor changing
trends and tastes and tailors its branded offerings and marketing activity to
compete effectively with other operators in the market and with the many other
activities that compete for the disposable income of our target 18-30 age
customers.
The legal and regulatory environment in which the Group operates has been
subject to significant change recently and will also see a further change. This
includes the implementation of the 2003 Licensing Act in November 2005 and the
manifestation of smoking bans in Scotland (March 2006), Wales (April 2007) and
England (July 2007).
The Group takes seriously its corporate responsibility on a range of issues
including responsible retailing, underage drinking, health and safety, drug
awareness, smoking and the environment.
Our customers should enjoy a fun, safe night out. We strive to achieve the
highest levels of safety within our venues by investing in the best possible
security.
Strategy
The Group's strategy has continued to build on its leading position in the late
night market for dancing and drinking, with a more concentrated focus following
the disposal of the 98 entertainment and non-core units in January 2007. In
addition to a number of branded units, the Group will retain other properties
suitable for branding, plus a selection of other good quality clubs that achieve
high returns.
In pursuing this strategy the Group is investing in proven branded concepts,
leveraging its substantial operational strengths and experience in the late
night market.
During 2006/07 the Group invested #51.2m in re-branding, refurbishment and
maintenance capital expenditure, of which 83% was on dancing venues. During the
year there were 12 branded openings - 3 Oceanas, 8 Liquids and 1 Lava & Ignite.
Since the year end, 2 new Liquids have opened in Uxbridge and Portsmouth, and
Liquid Rotherham has been refurbished.
The future composition of the Group's business is planned to be as follows:
Segments March 2006 * March 2007 ** Strategy Future
Units Units Units
Dancing 110 93 Brand approximately 70% as core 120
brands (Oceana, Liquid, Lava &
Ignite)
Entertainment
(now reported
within non-core) 79 n/a n/a
Non-core 41 29 Realise value from combining or -
disposing
Total non-core 120 29 -
Total units 230 122 120
The units presented above represent the total of continuing and discontinued operations, but
exclude units in development (6 at March 2007) and sub-let units (14 at March 2007):
* Of the total 230 units, 107 within dancing, 74 within entertainment and 9 within non-core
represent continuing operations (total continuing operations being 190)
** Of the total 122 units, 93 within dancing and 13 within non-core represent continuing operations
(total continuing operations being 106)
The future Luminar nightclub business will be high quality, predominantly
branded, providing a product that will differentiate it from competitors in the
marketplace and allow the business to continue to prosper through this period of
regulatory change. Going forward, approximately 70% of dancing units will be
branded.
Results and performance
Comparative income statement and cash flow information has been reclassified at
the balance sheet date to reflect the composition of the operations and their
segments as at these dates.
The total turnover and profitability generated by the Group is detailed below:
Total operations Units Turnover EBITDA* PBT*
1 March 2007 2007 2006 2007 2006 2007 2006
#m #m #m #m #m #m
Continuing 106 204.0 194.7 54.8 54.8 26.7 24.0
operations
Discontinued 16 96.4 143.5 15.7 32.3 14.8 21.6
operations
Total 122 300.4 338.2 70.5 87.1 41.5 45.6
* Pre-exceptional items
Sales from continuing operations are up #9.3m (5%) to #204.0m (2006: #194.7m)
including sales of #17.4m (2006: #5.8m) relating to the units acquired from The
Nightclub Company ("TNC") in the prior year. Like-for-like sales for the
Dancing Division were down 3% predominately due to the adverse trading
conditions in the first half.
Gross margin from continuing operations has improved by 70 basis points to 84.4%
(2006: 83.7%).
EBITDA pre-exceptional items from continuing operations has remained consistent
at #54.8m. EBITDA from continuing and discontinued operations pre-exceptional
items is down #16.6m to #70.5m (2006: #87.1m). This decrease is due to the
units sold as part of the Entertainment Division.
Total profit before tax pre-exceptional items has reduced to #41.5m (2006:
#45.6m) due to disposals. Profit before tax from continuing operations
pre-exceptional items is #26.7m (2006: #24.0m), and profit before tax from
discontinued operations pre-exceptional items is #14.8m (2006: #21.6m). The
increase from continuing operations has been helped by lower interest costs as a
result of lower average net debt levels than in 2006. Earnings per share from
continuing operations pre-exceptional items is up 9% to 28.9p per share (2006:
26.5p per share).
Profit before tax from continuing operations post-exceptional items is up 100%
to #18.4m (2006: #9.2m), as a result of lower exceptional items. Earnings per
share post-exceptional items is up 32% to 20.7p per share (2006: 15.7p per
share).
Segmental review
The performance of each segment within continuing operations is set out below:
Units Revenue Revenue per unit Profit from operations * Profit from
operations per
unit *
1 March 2007 2006 2007 2006 2007 2006 2007 2006
2007
Number #m #m #'000 #'000 #m % #m % #'000 #'000
Dancing 93 189.3 177.6 2,035 1,910 49.9 26.4 51.2 28.8 537 551
Non-core 13 14.7 17.1 1,131 1,315 1.0 6.8 1.0 5.8 77 77
Continuing
operations ** 106 204.0 194.7 1,925 1,837 50.9 25.0 52.2 26.8 480 492
* Profit from operations is stated pre-exceptional items and net finance costs
** Profit from continuing operations is stated before corporate costs
Dancing Division Year ended Year ended Movement
1 March 2007 2 March 2006 %
#m #m
Turnover 189.3 177.6 7
EBITDA 66.8 68.3 (2)
Operating profit 49.9 51.2 (3)
Operating margin 26.4% 28.8% (2)
Number of units at year end 93
* Relating to continuing operations
** Pre-exceptional items
During the year the Group has continued to transform its underlying business to
a more focused branded destination dancing business.
There were 12 branded openings during the year, bringing the branded portfolio
at the year end to 8 Oceanas, 10 Lava & Ignites, 28 Liquids and 2 Life clubs. A
full unit reconciliation is included in this statement as Appendix 1.
Of the 13 units acquired from TNC, 3 units have been combined with others to
create 10 larger units. Of these units, 3 have been branded, 2 are in
development for branding, and 5 are currently unbranded.
Sales were driven by increases in Dancing. Performance was particularly strong
in the second half, with growth of 7% for the year. Like-for-like sales for the
branded dancing units are down 1%. Like-for-like sales for the Oceana and Lava
& Ignite brands are up 4.9% and 0.3% respectively. Like-for-like sales for the
Liquid brand are down 3.8% for the year. This is predominately due to a poor
first half, however trading in the second half returned to like-for-like growth.
Operating profit is down #1.3m on prior year levels, with a decline of 2.4% in
the operating margin to 26.4%. Operating costs have increased as a result of
higher fixed costs and carrying the closure costs of TNC units whilst undergoing
re-branding. Labour costs are also higher than in the prior year at 27.6% of
turnover (2006: 26.7%). The Group has strengthened its labour management
through the implementation of a labour scheduling model; the benefits of which
started to materialise in quarter 4 of 2007.
Non-core Division Year ended Year ended Movement
1 March 2007 2 March 2006 %
#m #m
Turnover 14.7 17.1 (14)
EBITDA 1.9 2.9 (34)
Operating profit 1.0 1.0 -
Operating margin 6.8% 5.8% 1
Number of units at year end 13
* Relating to continuing operations
** Pre-exceptional items
The non-core units reported within continuing operations include the 7 units
previously reported within the Entertainment Division, and 6 closed non-core
units, which did not meet the criteria for presentation as held for sale at the
year end, and therefore have been classified within continuing operations.
Sales for the Non-core Division are down 14% to #14.7m (2006: #17.1m).
Operating profit has been contained at #1.0m, due to an improvement in the gross
profit margin from 81% of sales to 84% and a #1.4m reduction in operating costs.
EBITDA pre-exceptional items from non-core operations has fallen from #2.9m to
#1.9m due to disposals.
Head office and management costs
Head office and management costs comprise the head office and administrative
functions, area and divisional management costs, central depreciation and
information technology costs for the Group.
During the year the Group has made excellent progress in reducing the corporate
cost base. Corporate costs from continuing and discontinued operations reported
within operating margin pre-exceptional items have reduced by #2.6m from #21.4m
to #18.8m (see note 2). This is ahead of the committed target announced last
year of #2.0m of cost savings in the next 12 months and a further #2.0m in the
following 24 months. Management now expect to realise a further #2.0m of cost
savings following the Entertainment Division and non-core clubs disposal. This
will bring the total savings delivered to #6.0m.
During the year, the Group's former administration centre in Luton was sold for
its net book value of #0.9m.
Discontinued operations
Discontinued operations comprise the units sold as part of the Entertainment
Division and non-core clubs disposal (and the Enterprise Division disposal in
the prior year) and other non-core units, which are either held for sale or have
been disposed of during the year. Non-core units yet to be marketed for sale
are presented within continuing operations, since although these units form part
of the Group's disposal strategy, these units do not meet the criteria to be
classified as discontinued operations under IFRS 5, Non-current assets held for
sale and discontinued operations.
The number of units comprising discontinued operations total 126, with 98
relating to the sale of the Entertainment Division and other non-core clubs, a
further 12 units disposed of during the year, with the remaining 16 units
relating to other trading or closed non-core operations held for sale.
Of the 12 single site units disposed of in the current year within discontinued
operations, 5 related to unit sales with net proceeds of #2.8m, 4 were lease
surrenders incurring a payment of #2.6m, 2 were lease assignments and 1 was a
lease expiry.
Sales relating to discontinued operations total #96.4m (2006: #143.5m), with
operating profit pre-exceptional items of #14.9m (2006: #21.7m). The main
reason for the decrease in these figures is due to reduced activity in the units
disposed of as part of the Entertainment Division and non-core clubs sale and
their disposal in January 2007, resulting in only 10 months of contribution from
these units in the current year.
Exceptional items
The Group has recognised exceptional items before taxation relating to
continuing operations of #8.3m (2006: #14.8m). Full details are included in
note 7 to this preliminary statement.
Key performance indicators (KPI's)
The Board review and approve the annual budget in the context of the previously
approved strategy. In addition to reviewing Group performance against budget on
a monthly basis, the Board established a number of KPI's to track the delivery
of the Group's strategy and generally monitor the performance of the business.
Operational effectiveness
> Target - increase admissions by 5%
- Dancing admissions up 5.1%
> Target - increase gross margin by 0.5%
- Gross margin from continuing operations up 0.7% to 84.4% (2006:
83.7%)
- Control of labour costs improved in quarter 4 of 2007 - year end
ratio to turnover from continuing operations of 27.6%
> Target - deliver a #4.0m central cost reduction over 3 years
- #2.6m achieved to date
- Management have now increased that target to #6.0m
> Target - reduce development cost to #120 per sq ft for Oceana and #100
per sq ft for Liquid
- Oceana brand #119 per sq ft
- Liquid brand #103 per sq ft
- Further 10% reduction in target set for next financial year
Financial effectiveness
> Target - dividend cover of 2 times
- Total dividend for the year of 17.20p per share (2006: 15.18p per
share) achieves cover of 2.5 times
- On track with target, achieving a sensible dividend progression year
on year
> Target - share buy-back of #70m over 3 years
- #23m returned to shareholders during the year
- Additional funds from the Entertainment Division disposal to augment
the programme within the parameters set
> Target - return on investment of 25% post tax
- Achieved
Current trading
Like-for-like sales for the first 10 weeks of the financial year were up 7.3% in
branded dancing.
During the first 10 weeks gross margins have continued to strengthen following
the rigorous implementation of management's operational effectiveness actions.
Summary
The Group is by a significant margin the largest and most experienced nightclub
operator in the United Kingdom. It has strong cash flows, outstanding assets
and well-motivated, capable and experienced staff. The Group's strategy is
being successfully implemented and we are well on track with the programme to
deliver substantial shareholder value through the share buy-back programme.
The Group's 2007/08 development programme is progressing well with 3 new branded
openings since the year end. The early conclusions in relation to the no
smoking ban from the Welsh units have been similar to the positive effect
experienced in the Scottish market and we have learned from our experience in
both regions. Preparations for the forthcoming smoking ban in England are well
on track.
Luminar is mid-way through its transformation. Having achieved clarity on our
strategy, we are well on the way to creating the optimal shape of the Group.
Now our energy is directed at achieving our stated operational KPI's, delivering
efficiency and hence returns. Finally, we can focus on the content of our
units, which will drive growth and maintain our market leadership. Therefore
the Board is confident in the Group's future prospects.
Consolidated Income Statement
for the year ended 1 March 2007
Year ended 1 March 2007 Year ended 2 March 2006
Pre- Exceptional Pre- Exceptional
exceptional items exceptional items
items (note 7) Total items (note 7) Total
Notes #m #m #m #m #m #m
Continuing operations
Revenue 2 204.0 - 204.0 194.7 - 194.7
Cost of sales (31.9) - (31.9) (31.7) - (31.7)
Gross profit 172.1 - 172.1 163.0 - 163.0
Administrative
expenses (138.4) (4.6) (143.0) (130.5) (0.5) (131.0)
Profit / (loss) from
trading operations 33.7 (4.6) 29.1 32.5 (0.5) 32.0
Exceptional items
relating to closure
of properties - (3.7) (3.7) - (14.3) (14.3)
Profit / (loss) from
operations 2 33.7 (8.3) 25.4 32.5 (14.8) 17.7
Interest receivable 3 1.6 - 1.6 2.6 - 2.6
Finance costs 3 (8.3) - (8.3) (11.1) - (11.1)
Loss from associate (0.3) - (0.3) - - -
Profit / (loss)
before taxation 2 26.7 (8.3) 18.4 24.0 (14.8) 9.2
Tax on profit /
(loss) 4 (6.3) 2.5 (3.8) (4.6) 6.9 2.3
Profit / (loss) for
the year from
continuing operations
attributable to
equity shareholders 20.4 (5.8) 14.6 19.4 (7.9) 11.5
Profit / (loss) from
discontinued
operations 2,8 10.9 10.1 21.0 13.6 (23.4) (9.8)
Profit / (loss) for
the year attributable
to equity
shareholders 31.3 4.3 35.6 33.0 (31.3) 1.7
Earnings per share
from continuing
operations
Basic 6 20.7p 15.7p
Diluted 6 20.7p 15.7p
Earnings per share
from continuing and
discontinued
operations
Basic 6 50.4p 2.3p
Diluted 6 50.4p 2.3p
Dividends per share 5 15.62p 14.20p
Consolidated Balance Sheet
at 1 March 2007
1 March 2007 2 March 2006
Note #m #m
Non-current assets
Goodwill 174.9 177.5
Other intangible assets 1.8 2.1
Property, plant and equipment 300.4 383.1
Other non-current assets 4.7 7.4
Investment in associate 30.3 -
Trade and other receivables 19.5 -
531.6 570.1
Current assets
Inventories 2.4 2.6
Trade and other receivables 7.3 13.0
Cash and cash equivalents 14.7 71.9
24.4 87.5
Assets classified as held for sale 8 13.6 33.4
38.0 120.9
Current liabilities
Trade and other payables (27.5) (23.9)
Current tax liabilities (35.6) (30.2)
Deferred income (0.5) (0.6)
Provisions (4.3) (2.3)
(67.9) (57.0)
Liabilities classified as held for sale 8 (3.7) (12.2)
(71.6) (69.2)
Net current (liabilities) / assets (33.6) 51.7
Total assets less current liabilities 498.0 621.8
Non-current liabilities
Bank loans (72.7) (179.2)
Deferred income (7.2) (9.3)
Obligations under finance leases (8.0) (5.6)
Provisions (4.4) (5.5)
Deferred tax liabilities (26.9) (43.9)
(119.2) (243.5)
Net assets 378.8 378.3
Capital and reserves
Share capital 17.5 18.3
Share premium 61.0 60.9
Capital reserve 2.3 2.3
Capital redemption reserve 0.8 -
Merger reserve 235.3 241.1
Equity reserve 0.4 0.5
Retained earnings 61.5 55.2
Shareholders' equity 378.8 378.3
Consolidated Cash Flow Statement
for the year ended 1 March 2007
Year ended Year ended
1 March 2007 2 March 2006
Note #m #m
Cash flows from operating activities
Cash generated from operations 9 59.2 74.1
Tax received - 7.1
Interest paid (8.4) (11.1)
50.8 70.1
Cash flows from investing activities
Purchase of property, plant and equipment (52.3) (56.4)
Purchase of intangible assets (0.6) (0.8)
Net proceeds from sale of property, plant and
equipment
12.1 5.2
Proceeds from sale and leaseback of property,
plant and equipment - 28.0
Acquisition of business - (10.9)
Proceeds received on disposal of business 76.8 24.5
Costs associated with disposal of business (2.8) (2.0)
Payments associated with surrender of leases (2.6) -
Interest received 1.3 2.6
31.9 (9.8)
Cash flows from financing activities
Net repayment of long term borrowings (106.7) -
Repurchase of shares (21.6) -
Payment from shares issued 0.1 -
Repayment of short term loan note - (0.9)
Settlement of interest rate swap (0.5) -
Dividends paid (11.4) (10.3)
(140.1) (11.2)
Net (decrease) / increase in cash and cash (57.4) 49.1
equivalents
Cash and cash equivalents at beginning of year * 72.1 23.0
Cash and cash equivalents at end of year * 14.7 72.1
* Cash and cash equivalents of #14.7m (2006: #72.1m) includes cash and cash
equivalents of #nil (2006: #0.2m), presented within assets classified as held
for sale
Net Debt
The movement in net debt in the year was analysed as follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Decrease / (increase) in cash in the year 57.4 (49.1)
Non-cash changes - increase in finance lease liabilities 1.7 -
Cash outflow from repayment of finance (106.7) (0.9)
Movement in net debt in the year (47.6) (50.0)
Opening net debt 115.0 165.0
Closing net debt 67.4 115.0
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 1 March 2007
Share Share Capital Capital Merger Equity Retained Total
capital premium reserve redemption reserve reserve earnings
reserve
#m #m #m #m #m #m #m #m
Brought forward at 28 February
2005 18.3 60.9 2.3 - 280.2 0.3 25.0 387.0
Adjustment for implementation of
IAS 39 - - - - - - (0.3) (0.3)
Restated brought forward at 28
February 2005 18.3 60.9 2.3 - 280.2 0.3 24.7 386.7
Profit for the year - - - - - - 1.7 1.7
Share-based payment expense - - - - - 0.2 - 0.2
Amounts attributable to equity
shareholders 18.3 60.9 2.3 - 280.2 0.5 26.4 388.6
Dividends paid (note 5) - - - - - - (10.3) (10.3)
Transfer from merger reserve - - - - (39.1) - 39.1 -
Carried forward at 2 March 2006 18.3 60.9 2.3 - 241.1 0.5 55.2 378.3
Brought forward at 3 March 2006 18.3 60.9 2.3 - 241.1 0.5 55.2 378.3
Profit for the year - - - - - - 35.6 35.6
Share-based payment credit - - - - - (0.1) - (0.1)
Deferred taxation on share-based
payment - - - - - - (0.5) (0.5)
Shares issued - 0.1 - - - - - 0.1
Share buy-backs (0.8) - - 0.8 - - (23.2) (23.2)
Amounts attributable to equity
shareholders 17.5 61.0 2.3 0.8 241.1 0.4 67.1 390.2
Dividends paid (note 5) - - - - - (11.4) (11.4)
Transfer from merger reserve - - - - (5.8) - 5.8 -
Carried forward at 1 March 2007 17.5 61.0 2.3 0.8 235.3 0.4 61.5 378.8
Notes to the Consolidated Financial Statements
for the year ended 1 March 2007
1 Basis of preparation
The preliminary announcement for the year ended 1 March 2007 has been prepared
in accordance with International Accounting Standards and International
Financial Reporting Standards (collectively "IFRS"), as adopted by the European
Union at 1 March 2007, and the accounting policies set out in the financial
statements for the year ended 2 March 2006. These accounts can be found within
the investors section of the Group's website, www.luminar.co.uk.
The annual financial information presented within the preliminary announcement
for the year ended 1 March 2007 is extracted from, and is consistent with, that
in the Group's consolidated financial statements for the year ended 1 March
2007, and those financial statements will be delivered to the Registrar of
Companies following the Group's Annual General Meeting.
Information in this preliminary announcement does not constitute the full
financial statements of the Group within the meaning of s240 of the Companies
Act 1985. Financial statements for the year ended 2 March 2006, on which
PricewaterhouseCoopers LLP expressed an unqualified opinion, have been filed
with the Registrar of Companies.
2 Segmental reporting
Business divisions
The Group is principally engaged as owner, developer and operator of nightclubs
and themed bars in the United Kingdom.
For management purposes, the Group is now organised into two main business
divisions - Dancing and Non-core. Non-core operations combines the retained
units previously disclosed within the Entertainment Division and the units
historically reported within the Non-core Division.
Comparative income statement and cash flow information has been reclassified at
the balance sheet date to reflect the composition of the divisions as at these
dates. Segmental information about these business divisions is presented below:
For the year ended 1 March 2007
Dancing Non-core Corporate costs Consolidated
#m #m #m #m
Total revenue 189.3 14.7 - 204.0
Operating profit /
(loss) pre-exceptional
items 49.9 1.0 (17.2) 33.7
Exceptional items (4.6) (2.3) (1.4) (8.3)
Segment result 45.3 (1.3) (18.6) 25.4
Net finance costs (6.7)
Loss from associate (0.3)
Profit before taxation 18.4
Tax on continuing
operations (3.8)
Profit from continuing
operations 14.6
Profit / (loss) from
discontinued operations
pre-exceptional items 1.9 14.5 (1.6) 14.8
Exceptional items - (8.5) (1.2) (9.7)
Profit / (loss) from
discontinued operations
before tax 1.9 6.0 (2.8) 5.1
Tax on discontinued
operations
Profit from discontinued
operations 15.9
21.0
Profit for the year 35.6
Corporate costs comprise the head office and administrative functions, area and
divisional management costs, together with information technology costs for the
Group.
For the year ended 2 March 2006
Dancing Non-core Corporate costs Consolidated
#m #m #m #m
Total revenue 177.6 17.1 - 194.7
Operating profit / (loss)
pre-exceptional items 51.2 1.0 (19.7) 32.5
Exceptional items 14.8 (25.6) (4.0) (14.8)
Segment result 66.0 (24.6) (23.7) 17.7
Net finance costs (8.5)
Profit before taxation 9.2
Tax on continuing
operations 2.3
Profit from continuing
operations 11.5
Profit / (loss) from
discontinued operations
pre-exceptional items 2.3 21.0 (1.7) 21.6
Exceptional items - (30.8) - (30.8)
(Loss) / profit from
discontinued operations
before tax 2.3 (9.8) (1.7) (9.2)
Tax on discontinued (0.6)
operations
Loss from discontinued
operations (9.8)
Profit for the year 1.7
3 Net finance costs
Net finance costs relating to continuing operations are as follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Interest payable on bank borrowings (7.6) (10.1)
Interest payable on obligations under finance leases (0.4) (0.3)
Amortisation of issue costs of bank loan (0.2) (0.1)
Other interest payable (0.1) (0.3)
Total borrowing costs (8.3) (10.8)
Less amounts capitalised in the cost of qualifying assets - 0.2
Losses arising on derivatives - (0.5)
Finance costs (8.3) (11.1)
Income on bank deposits 1.4 1.8
Interest on loan to associate undertaking 0.2 -
Other interest - 0.8
Interest receivable 1.6 2.6
Finance costs - net (6.7) (8.5)
Finance costs relating to discontinued operations, being interest payable on
obligations under finance leases, total #0.1m (2006: #0.1m).
Interest capitalised in the cost of qualifying assets is calculated using the
borrowing rate obtainable by the Group under its current facility at the start
of each financial year. Interest is calculated from the date capital
expenditure commences until the opening of the relevant unit.
4 Tax on profit / (loss)
(a) Analysis of charge in period
The taxation charge is based on the profit for the year and represents:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Current tax
- Continuing operations
- Current period (5.6) (7.5)
- Adjustments from prior periods 1.9 0.8
- Discontinued operations
- Current period (1.7) (4.8)
- Adjustments from prior periods - 0.3
(5.4) (11.2)
Deferred tax
- Continuing operations (0.1) 9.0
- Discontinued operations 17.6 3.9
17.5 12.9
Total taxation credit / (charge)
- Continuing operations (3.8) 2.3
- Discontinued operations 15.9 (0.6)
12.1 1.7
The taxation relating to exceptional items is disclosed in note 7.
(b) Tax on items charged to equity
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Share-based payment 0.5 -
Implementation of IAS 39, Financial Instruments: Recognition
and Measurement
- 0.2
0.5 0.2
(c) Factors affecting tax charge for period
The tax assessed for the period is lower (2006: lower) than the standard rate of
corporation tax in the UK. The differences are explained as follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Profit on ordinary activities from continuing operations
before tax 18.4 9.2
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 30% (2006: 30%) (5.5) (2.8)
Effects of:
Expenses not deductible for tax purposes (0.1) (0.2)
Non-deductible exceptional items (1.3) (0.9)
Utilisation of capital losses not previously recognised - 2.1
Adjustments in respect of the prior year 1.9 0.8
Non-qualifying depreciation 1.2 3.3
Total tax (charge) / credit from continuing operations for
the year
(3.8) 2.3
5 Dividends
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Ordinary shares - final dividend paid for 2006: 10.74p
per share (final dividend paid for 2005: 9.76p per share) 7.8 7.1
Ordinary shares - interim dividend paid for 2007: 4.88p
per share (interim dividend paid for 2006: 4.44p per
share) 3.6 3.2
11.4 10.3
In addition, the Directors are proposing a final dividend in respect of the
current financial year of 12.32p per share, which will absorb an estimated #8.6m
of shareholders' equity. It will be paid on 24 July 2007 for shareholders on
the register as at 22 June 2007. This dividend is subject to approval at the
Annual General Meeting, and has not been included as a liability within these
financial statements in accordance with IAS 10, Events after the balance sheet
date.
6 Earnings per share
The calculation of the basic earnings per share (EPS) is calculated by dividing
the earnings attributed to ordinary shareholders by the weighted average number
of shares in issue during the year. For diluted earnings per share the weighted
average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares. The Group has two classes of dilutive
potential ordinary shares: share options granted to Directors and employees
where the exercise price is less than the average market price of the Group's
ordinary shares during the year, and the contingently issuable shares under the
Group's long-term incentive plan (i.e. the Deferred Bonus Plan). At the year end
the performance criteria for the vesting of awards under certain share option
schemes of the Group had not been met and consequently these potential shares
are excluded from the diluted EPS calculation.
An alternative measure of earnings per share from continuing operations
pre-exceptional items has been included below as the Directors believe that this
measure of earnings per share is more reflective of the ongoing trading of the
Group.
Reconciliation of the earnings and weighted average number of shares used in the
calculations are set out below.
Year ended 1 March 2007
Weighted
average number
of shares (in
millions)
Per share amount
Earnings (pence)
#m
Basic EPS
Earnings attributable to ordinary
shareholders 35.6 70.6 50.4
Effect of dilutive securities - options - 0.1 -
Diluted EPS 35.6 70.7 50.4
Basic EPS from continuing operations 14.6 70.6 20.7
Diluted EPS from continuing operations 14.6 70.7 20.7
Basic EPS from discontinued operations 21.0 70.6 29.7
Diluted EPS from discontinued operations 21.0 70.7 29.7
EPS from continuing operations
pre-exceptional items
Basic EPS from continuing operations
pre-exceptional items 20.4 70.6 28.9
Diluted EPS from continuing operations
pre-exceptional items 20.4 70.7 28.9
Year ended 2 March 2006
Weighted
average
number of
shares Per share
Earnings (in millions) amount
#m (pence)
Basic EPS
Earnings attributable to ordinary
shareholders 1.7 73.2 2.3
Effect of dilutive securities - options - 0.1 -
Diluted EPS 1.7 73.3 2.3
Basic EPS from continuing operations 11.5 73.2 15.7
Diluted EPS from continuing operations 11.5 73.3 15.7
Basic EPS from discontinued operations (9.8) 73.2 (13.4)
Diluted EPS from discontinued operations (9.8) 73.3 (13.4)
EPS from continuing operations
pre-exceptional items
Basic EPS from continuing operations
pre-exceptional items 19.4 73.2 26.5
Diluted EPS from continuing operations
pre-exceptional items 19.4 73.3 26.5
7 Exceptional items
(a) Continuing operations
The Group incurred exceptional items on continuing operations as follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Exceptional items relating to trading units
Impairment of property, plant and equipment on trading units (2.8) (0.1)
Reversal of prior years impairment of property, plant and
equipment
- 9.5
Impairment of goodwill - (17.5)
Reversal of provision for onerous lease commitments - 0.6
Profit on sale and leaseback of property, plant and equipment - 7.7
Costs relating to re-organisation and rationalisation (1.8) (0.7)
(4.6) (0.5)
Exceptional items relating to the closure of properties
Impairment of property, plant and equipment
- on closed units (2.5) (8.2)
- on head office property - (3.1)
Provision for onerous lease commitments (3.2) (3.1)
Reversal of provision for onerous lease commitments 0.3 0.1
Net profit on insurance recovery due to fire 1.7 -
(3.7) (14.3)
Pre-tax exceptional items relating to continuing operations
(8.3) (14.8)
Tax on exceptional items 2.5 6.9
Post-tax exceptional items relating to continuing operations (5.8) (7.9)
The exceptional items recognised within continuing operations have been split
between those which relate to units associated with the ongoing trading of the
Group and those which relate to the closure of units. These units, although
closed, were not actively marketed prior to the balance sheet date. As a result
these units do not meet the criteria to be classified as held for sale, and
therefore have been presented within continuing operations.
(i) Exceptional items relating to trading units
The impairment of property, plant and equipment of #2.8m (2006: #0.1m) on
trading units reflects the difference between the value in use of cash
generating units (e.g. discrete trading units) and their carrying value. #2.1m
of this impairment relates to trading units within the non-core segment and
#0.7m relates to an unbranded dancing venue. The development plans for these
units is yet to be decided.
The reversal of prior years impairment charges of #9.5m in the year ended 2
March 2006 arose as the trigger causing the original impairment to be recognised
had reversed, e.g. where it was subsequently planned to re-brand a unit.
The impairment of goodwill of #17.5m in the prior year arose following the
annual impairment test required under IFRS 3, Business Combinations. The
impairment was recognised against goodwill allocated to the non-core segment.
A reversal of previously recognised provisions for onerous lease commitments of
#0.6m in the year ended 2 March 2006 was recognised due to changes to the
intended use of the Group's units as a result of the re-branding strategy.
During the year ended 2 March 2006, the Group realised profits of #7.7m on the
sale and leaseback of three sites (Hemel Hempstead, the Milton Keynes head
office and Bury St Edmunds), for a total consideration of #28.0m, received in
cash. Deferred income of #6.3m, relating to proceeds receivable above the fair
value of the properties disposed, was recognised on the balance sheet at 2 March
2006 and is being amortised to the consolidated income statement over the life
of the lease on a straight line basis.
Costs of re-organisation and rationalisation of #1.8m (2006: #0.7m) have been
incurred in respect of the restructuring of the Group's subsidiaries and
recruiting key personnel. In the prior year these costs related to relocating
and rationalising the Group's administration centre.
(ii) Exceptional items relating to the closure of properties
The impairment of property, plant and equipment of #2.5m (2006: #8.2m), has
principally arisen from the closure of two unbranded dancing units, pending a
decision on their future development. In the prior year a charge of #3.1m was
incurred from the re-measurement to the fair value less costs of sale of the
Group's former administration centre following the relocation of the head office
to Milton Keynes. During the year the former head office premises were sold for
a consideration of #0.9m, generating a nil profit on disposal.
The charges arising from onerous lease commitments of #3.2m (2006: #3.1m) are to
recognise the obligation for rent and related property costs on currently vacant
or closed units, where the likelihood of assignment of the lease or sub-let of
the property is unlikely in the short term. These units are closed or vacant
following the relocation of the Group's administration centres, the closure of
non-core sites not suitable for re-branding and the closure of an unbranded
dancing unit, awaiting a future development plan.
During the year, #2.5m was received in relation to an insurance recovery claim
against a unit which burnt down in 2005. This unit had been impaired in 2006 to
#0.3m, and therefore a profit of #2.1m, after incurring costs of #0.1m, has been
recorded. #0.4m of this profit relating to business interruption, has been
credited to administrative expenses.
(b) Discontinued operations
The Group incurred exceptional items relating to discontinued operations as
follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Impairment of property, plant and equipment (1.1) (12.8)
Reversal of prior years impairment of property, plant and 0.1 2.5
equipment
Impairment of other non-current assets (0.6) -
Impairment of goodwill - (16.2)
(1.6) (26.5)
Costs relating to re-organisation and rationalisation (1.2) (1.8)
Provision for onerous lease commitments (2.0) (3.8)
Reversal of provision for onerous lease commitments 0.5 1.1
Realised loss on disposal of the Entertainment Division (3.6) -
Realised loss on disposal of the Enterprise Division - (3.0)
Realised (loss) / profit on disposals (0.3) 3.2
Other costs associated with disposals (1.5) -
Pre-tax exceptional items relating to discontinued
operations (9.7) (30.8)
Tax on exceptional items 19.8 7.4
Post-tax exceptional items relating to discontinued
operations 10.1 (23.4)
The impairment of property, plant and equipment of #1.1m (2006: #12.8m) and
other non-current assets of #0.6m (2006: #nil) has resulted from re-measuring to
fair value less costs of sale units held for sale. The reversal of prior years
impairment charges of #0.1m (2006: #2.5m) has resulted from the upward
re-measurement of units held for sale to the extent of previously recognised
impairment charges.
The impairment of goodwill of #16.2m in the prior year arose following the
annual impairment test required under IFRS 3, Business Combinations, as a result
of re-measuring non-core units held for sale at their fair value less costs of
sale.
Costs of re-organisation and rationalisation of #1.2m (2006: #1.8m) have been
incurred in respect of the restructuring of the Group's subsidiaries and
rationalising the Group's administration centre.
The provision for onerous lease commitments of #2.0m (2006: #3.8m) has arisen
from the closure of sites following the decision to exit from non-core
operations. The reversal of previously recognised provisions of #0.5m (2006:
#1.1m) has arisen as a result of re-measurement of units to their held for sale
value, which is in excess of that assumed when the provision was created.
An exceptional loss on disposal of the Entertainment Division of #3.6m (2006:
#nil), has been recognised on completion of the sale on 19 January 2007 (see
note 8).
In the prior year an exceptional loss on disposal of the Enterprise Division of
#3.0m was recognised on completion of the sale.
The loss on disposal of single sites of #0.3m (2006: #3.2m profit) has arisen on
the disposal of 12 units for consideration of #4.3m, all of which has been
received in cash during the year. Other costs of #1.5m have been incurred in
relation to these disposals. Of the 12 units disposed, payments totalling #2.6m
were made to landlords in relation to the surrender of 3 leases.
8 Discontinued operations and non-current assets held for sale
Comparative income statement and cash flow information is restated at each
balance sheet date to reflect the composition of discontinued operations as at
the latest balance sheet date.
(a) Results of discontinued operations
The results of discontinued operations, which comprise the Entertainment
Division (and the Enterprise Division in the prior year) and other non-core
units, either disposed of or held for sale, forming part of the Group's plan to
exit from its non-core operations, included within the Consolidated Income
Statement were as follows:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Revenue 96.4 143.5
Administrative expenses (81.5) (121.8)
Finance costs (0.1) (0.1)
Profit before tax pre-exceptional items 14.8 21.6
Attributable tax expenses (3.9) (8.0)
Profit after tax pre-exceptional items 10.9 13.6
Exceptional items:
Re-measurement to held for sale (1.6) (26.5)
Loss on disposal of the Entertainment Division (3.6) -
Loss on disposal of the Enterprise Division - (3.0)
Other exceptional items (4.5) (1.3)
Attributable tax credits 19.8 7.4
Net profit / (loss) attributable to discontinued operations 21.0 (9.8)
On 19 January 2007 the Group completed the disposal of the Entertainment
Division and non-core clubs, which comprised of 98 nightclubs. The net loss
realised on the disposal totalled #3.6m (see appendix 2).
Consideration for the disposal totalled #96.1m, of which cash consideration
represented #76.8m and an unsecured loan note with the vendor, the 3D
Entertainment Group Limited, comprised #19.3m. Cash disposed on the sale of the
Entertainment Division totalled #0.8m, for which payment was made.
Consolidated net assets disposed amounted to #123.3m, of which the material
amounts were property, plant and equipment, with costs and asset write-downs
associated with the transaction above totalling #7.0m. This transaction gave
rise to #62.5m of negative goodwill in 3D Entertainment Group Limited, of which
the Group's share at 49% of #30.6m, has been recognised immediately in
accordance with IFRS 3, Business Combinations.
During the year a tax credit of #19.8m (2006: #7.4m credit) was recognised on
exceptional items relating to discontinued operations. This has arisen due to
the release of the entire deferred tax liability carried in respect of the units
disposed of during the year, principally the liability relating to the units
sold as part of the Entertainment Division disposal.
(b) Cash flow from discontinued operations
The Consolidated Cash Flow Statement includes the following cash flows arising
from discontinued operations.
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Net cash flows from operating activities 12.9 30.3
Net cash flows from investment activities 76.7 21.5
Net cash flows from financing activities - -
89.6 51.8
(c) Assets and liabilities of units held for sale
On 1 March 2007 19 units were classified as held for sale, of which 16 units
were within the non-core segment and 3 were within the dancing segment. Of the
19 units, 4 units have been unconditionally exchanged and have an agreed
completion date of August 2007, 2 units have exchanged post year end (1 for a
sub-let) and a further 4 units are with the lawyers for completion in the next
few months (1 for a sub-let). The remaining 9 units were actively being
marketed at the balance sheet date and informal offers have been received
against some of these units, which formed the basis for the estimates of fair
value less costs of sale for these units.
A net charge of #nil (2006: #25.9m) has been recognised on re-measurement of
units held for sale to fair value less costs of sale, which includes an upward
revaluation to fair value less costs of sale of #0.1m, to the extent of
previously recognised impairment losses.
The major classes of assets and liabilities comprising the units classified as
held for sale are as follows:
1 March 2007 2 March 2006
#m #m
Property, plant and equipment 13.0 30.5
Inventories 0.1 1.4
Trade and other receivables 0.5 1.3
Cash and cash equivalents - 0.2
Total assets classified as held for sale 13.6 33.4
Trade and other payables (0.9) (6.4)
Finance lease obligations (0.8) (1.5)
Deferred income (0.2) (0.6)
Deferred tax -
Provisions (1.8) (3.7)
Total liabilities classified as held for sale (3.7) (12.2)
Net assets held for sale 9.9 21.2
9 Cash flow from operating activities and net debt
a) Reconciliation of net cash inflow from operating activities
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Profit before taxation - continuing operations 18.4 9.2
Profit / (loss) before taxation - discontinued 5.1 (9.2)
operations
Profit before taxation 23.5 -
Outflows relating to exceptional cash items 4.3 2.3
27.8 2.3
Depreciation and amortisation 21.9 32.9
Amortisation of lease premiums 0.2 -
Amortisation of issue costs on bank loan 0.2 -
Loss in associate 0.3 -
Net impairment of property, plant and equipment 6.3 12.2
Impairment of goodwill - 33.7
Impairment of other non-current assets 0.6 -
Profit on insurance recovery due to fire (2.1) -
Loss / (profit) on sale of property, plant and
equipment 0.3 (3.2)
Loss on disposal of intangible assets 0.2 -
Profit on sale and leaseback - (7.7)
Loss on disposal of Division 3.6 3.0
Net finance costs 6.8 8.6
66.1 81.8
Decrease / (increase) in inventories 1.5 (0.1)
Decrease / (increase) in receivables 0.7 (3.3)
Decrease in trade and other payables (8.5) (2.8)
Increase in provisions 2.0 4.8
Increase in finance lease liabilities 1.7 -
Net cash inflow from operations pre-exceptional
cash flow items 63.5 80.4
Outflows relating to exceptional cash items (4.3) (6.3)
Net cash inflow from operations 59.2 74.1
Cash outflows relating to exceptional items relate to costs associated with
disposals of #1.6m and costs of re-organisation and rationalisation of #2.7m.
In the year ended 2 March 2006, #4.0m of the #6.3m cash outflows relating to
exceptional items were incurred as a result of a VAT payment following
assessment by HM Revenue and Customs, against which the Group is currently in
the process of appealing. This was included within trade and other payables at
27 February 2005. The remaining #2.3m relates to cost associated with
re-organisation and rationalisation.
b) Net debt
The movement in net debt in the year is analysed as follows:
2 March 2006 Cash flow Non-cash flows 1 March 2007
#m #m #m #m
Cash and cash equivalents * 72.1 (57.4) - 14.7
Loans due in less than 1 year -
Loans due in more than 1 year (180.0) 106.7 - (73.3)
(107.9) 49.3 (58.6)
Finance leases * (7.1) - (1.7) (8.8)
Net debt (115.0) 49.3 (1.7) (67.4)
* Includes cash and cash equivalents and finance leases relating to units held
for sale
c) Cash flows from continuing operations
To assist in the understanding of cash flows relating to the ongoing business of
the Group, the following tables outline the cash flows relating to discontinued
operations and exceptional items to be excluded in order to present operating
cash flows that relate to the Group's continuing business:
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Cash flows from operating activities 50.8 70.1
Less: cash flows relating to operating activities - discontinued
operations (12.9) (30.3)
Add: outflows relating to exceptional cash items 4.3 6.3
Cash flows from operating activities pre-exceptional cash flows
- continuing operations 42.2 46.1
Year ended Year ended
1 March 2007 2 March 2006
#m #m
Net cash inflow from operations pre-exceptional cash flow items 63.5 80.4
Less: cash flows relating to operations - discontinued
operations (12.9) (30.3)
Cash flows from operations pre-exceptional cash flows -
continuing operations 50.6 50.1
Appendix 1: Unit reconciliation
The table below reconciles the units reported as at 2 March 2006 to those
reported as at 1 March 2007.
2 March 2006 1 March 2007
Segments Total units * Net transfers ** Disposals *** Total units *
Branded 43 6 (4) 45
Unbranded 67 (12) (7) 48
Dancing 110 (6) (11) 93
Entertainment 79 (14) (65) -
Non-core 41 18 (30) 29
Total 230 (2) (106) 122
* The units presented above exclude those units which are closed for development
or have been sub-let
** Net transfers relate to units transferred to development, sub-let or units
collapsed from 2 trading units into 1. This also includes the movement of 8
units formerly reported within the Entertainment Division to the Non-core
Division
*** Disposals exclude 2 units in development and 3 sub-let units
Appendix 2: Reconciliation of loss on disposal of the Entertainment Division
The table below reconciles the loss on disposal of the Entertainment Division to
that reported within the financial statements:
#m
Consideration
Cash 76.8
Loan note 19.3
Value of investment in 3D Entertainment Group Limited * 30.6
126.7
Assets disposed of:
Property, plant and equipment (123.3)
Goodwill (2.6)
Non-current assets (1.9)
Deferred income 1.9
Provisions 0.4
(125.5)
Transaction costs (4.8)
Loss on disposal (3.6)
* Value of investment reduced to #30.3m at the balance sheet date
This information is provided by RNS
The company news service from the London Stock Exchange
END
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