Preliminary Results -11-
November 30 2011 - 2:01AM
UK Regulatory
At 31 July 2010, the Group had credit facilities totalling
GBP180.0m with the Royal Bank of Scotland, Lloyds TSB and Barclays.
Of the GBP180.0m, GBP115.0m was in the form of revolving credit
facilities, which were to reduce by GBP10.0m in March 2011 and
2012, with the remaining balances of GBP30.0m expiring on 1 August
2012, and GBP65.0m expiring on 31 October 2012. The balance of
GBP65.0m was in the form of a term loan which also fell due for
repayment on 31 October 2012.
Also drawn against the facility were bonds and guarantees as
detailed in note 17. Interest under this facility was charged at
LIBOR plus a margin. The margin ranged from 0.65% to 3.65% adjusted
according to the ratio of net borrowings to earnings before
interest, taxation, depreciation and amortisation.
On 26 January 2011 the Group signed new medium-term banking
facilities with its existing relationship banks. The key terms of
the new facilities were: total facilities of GBP170.0m extending to
31 March 2014; interest above LIBOR on the facility of 3.1% - 4.0%
dependent on ratios; two repayments each of GBP7.5m on 31 July 2012
and 31 July 2013; in the event that an additional voluntary
repayment of GBP30.0m had not been made before 31 May 2012, an
increase in margin of 2% and the issue of warrants at that time
over 5% of the issued share capital of the Company at an issue
price of the lower of 75p per share and 80% of the share price at
that time; and a restriction on resuming dividend payments until
the voluntary repayment of GBP30.0m had been made.
The financial covenants applying to this facility and as defined
therein were: the ratio of net debt (including bonds) to EBITDA;
the ratio of EBITDA to net interest payable; and debt service
coverage (the ratio of free cash flow to interest and principal
repayments). Covenants were tested on a quarterly basis.
The first two of these covenants would have been breached on the
announcement of our results for the year ended 31 July 2011.
However due to the amendments to the Group's principal borrowing
facilities referred to below, such breach has been avoided and no
event of default has occurred. Consequently the amounts drawn down
at 31 July 2011 totalling GBP135.0m are disclosed as due within one
year. Also drawn against the facility are bonds and guarantees of
GBP15.2m which are included in contingent liabilities in note
17.
On 29 November 2011, the Company agreed amendments to the terms
of its principal banking facilities which now expire upto 31 March
2014. The purpose of the amendments is to avoid a breach of the
banking facilities which would otherwise have occurred upon
publication of the 2011 Accounts, to provide for a GBP16m increase
(repayable on or before 28 February 2013) in the facilities
available to GBP180m and to amend covenants with a view to avoiding
future financial covenant breaches which would otherwise be
expected to arise prior to April 2013. The amended credit
facilities comprise:
-- GBP129.0m term loan
-- a GBP35.0m revolving credit facility
-- an additional GBP16.0m revolving credit facility (the "Top-up
facility") in place until 28 February 2013
Pursuant to the amendments, the Company has agreed to pay an
amendment fee of GBP2.25m on the earlier of 31 January 2013 and the
date of a relevant restructuring, to issue warrants over 5% of the
existing issued share capital of the Company at a subscription
price of 0.25p per share, subject to standard anti-dilution
provisions, which replace the existing contingent obligation to
provide warrants to the lenders, and to pay an additional fee - the
equity tracker fee - which is payable upon a change of control and
that is the economic equivalent of 5% of the enlarged issued share
capital of the Company.
It is intended that a restructuring of the Group's balance sheet
would take place prior to the end of the current financial year in
the interests of the Group and its stakeholders. This restructuring
may include the injection of additional equity capital or a change
of control (the "Restructuring"). If the Restructuring is achieved
by 31 July 2012 then depending on the timing of the Restructuring,
either no restructuring fee would be payable or a fee of between
GBP1.5m and GBP3.0m would be payable. In the event that a
Restructuring is not achieved by 31 July 2012, an amendment fee of
GBP8.0m would be payable. Such additional amendment fees shall be
payable on the earlier of 31 January 2013 or the date of the
relevant Restructuring. Pending the repayment of the Group's
borrowing facilities in full, the restriction on dividend payments
will remain in place.
The interest margin on the term loan will remain unchanged at
3.85%. The interest margin on the revolving credit facilities will
be 6.5% apart from the margin on the Top-up facility which shall be
at 10%. The provision that there will be an increase in the
interest margin of 2% if an additional voluntary repayment of
GBP30.0m has not been made by 31 May 2012 has been removed.
Furthermore, the obligatory repayment of GBP7.5m due in 31 July
2012 has been extended to 28 February 2013 when the Top-up facility
shall also be repayable.
The Board believes that the facility amendments demonstrate the
support of the Banks. The facilities have been constructed to
provide the Board with time to right-size the Group balance sheet
while providing economic incentives to achieve this right-sizing at
the earliest practical opportunity. The amendments provide the
Company with critical time to identify and implement value creation
initiatives to enhance value. While the Top-up facility is
relatively expensive, the Group intends to use it sparingly, if at
all but it provides the Group with critical working capital
headroom.
The financial covenants applying to the new facility is a test
of EBITDA on a quarterly basis until 31 January 2013. Thereafter
the covenants revert to those in the facility signed on 26 January
2011.
Loans are repayable as follows:
2011 2010
GBPm GBPm
================================================ ====== ======
Obligations due within one year 135.1 0.7
Obligations due within one and two years - 0.1
Obligations due within two and five years - 128.7
================================================ ====== ======
Total loans due 135.1 129.5
Loan issue costs incurred (4.3) (4.5)
Amortisation of loan issue costs 4.3 1.7
================================================ ====== ======
Total borrowings 135.1 126.7
(Less)/add: Non bank borrowings and issue costs (0.1) 2.0
Deduct: cash and cash equivalents (note 15) (47.3) (45.4)
================================================ ====== ======
Net bank borrowings 87.7 83.3
================================================ ====== ======
At 31 July 2010, there were unamortised arrangement fees from
the previous facilities of GBP2.8m of which GBP0.6m was amortised
during the period to 31 July 2011, as disclosed in note 4, with the
balance of GBP2.2m being charged as an exceptional item, as
disclosed in note 3.
Loan issue costs of GBP4.3m associated with the new banking
facility were capitalised and were being amortised over the life of
the loan. The resulting amortisation charge of GBP0.7m was included
in finance costs (note 4). As a result of the requirement to
disclose the Group's banking facilities as due within one year, the
amortisation charge was accelerated and GBP3.6m was included in
exceptional finance costs (note 3).
The Group has entered into agreements to partially hedge against
the interest rate risk on the revolving credit facility above. The
fixed interest rate hedges vary from 3.22% to 5.33% against the
floating LIBOR rate. The expiry date of these hedges is between 17
December 2011 and 31 March 2014. At 31 July 2011, the total fair
value of derivatives designated as cash flow hedges was a liability
of GBP6.4m (2010: liability of GBP7.7m). The whole movement in the
fair value is recorded in the Consolidated Statement of Changes in
Equity as the hedges are considered highly effective.
At 31 July 2010, there were two secured loans totalling GBP0.8m
which were payable in instalments. The first loan on which interest
was charged at 6.84% was repaid in December 2010 and the second
loan on which interest is charged at 7.44% finishes in October
2011. The balance outstanding at 31 July 2011 on the second loan is
GBP0.1m.
13 Provisions for liabilities and charges
Insurance/
Claims Dilapidation Onerous
Restructuring provisions provisions contracts
provisions[1] (2) (3) (4) Total
GBPm GBPm GBPm GBPm GBPm
=========================== -------------- ----------- ------------ ---------- -----
Current 0.8 - 0.9 1.6 3.3
--------------------------- -------------- ----------- ------------ ---------- -----
Between one and two years - - 0.4 0.1 0.5
Between two and five years - 1.9 0.7 - 2.6
Over five years - - 1.1 - 1.1
=========================== ============== =========== ============ ========== =====
Non-current - 1.9 2.2 0.1 4.2
=========================== ============== =========== ============ ========== =====
At 31 July 2011 0.8 1.9 3.1 1.7 7.5
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