RNS Number : 1224W
Pubs 'n' Bars PLC
06 June 2008
Pubs 'n' Bars Plc
(AIM: PNB)
("Pubs 'n' Bars" or "the Company")
Final results for the period ended 31 December 2007
Pubs 'n' Bars, the AIM quoted community pub owner and operator, is pleased to announce its final results for the period ended 31
December 2007.
The results are prepared under IFRS (International Financial Reporting Standards), and the 2006 figures have also been restated under
IFRS.
Highlights:
* Revenues increased by 30 per cent. to �19.9m (2006: �15.3m)
* Profit before tax increased by 107 per cent. to �1.025m (2006: �495k)
* Underlying profit before tax of �900k (2006: �1m)
* EBITDA up 50 per cent. to �3.2m (2006: �2.1m)
* Net Assets increased to �22.2m (2006: �16.1m)
* NAV per share at year end 55.9p
* EPS (basic) of 5.30p (2006: 2.32p)
* Underlying EPS (basic) 4.87p (2006: 4.56p)
* Proposed total dividend of 1.25p per share for the year (2006: 1.75p per share)
* Acquisition of Moorgate London Ltd, Community Taverns Ltd and Moorgate Taverns Ltd.
Seamus Murphy, Chairman of Pubs 'n' Bars, commented:
"I am pleased to report a good set of results achieved under challenging conditions including the indoor smoking ban, cheap supermarket
alcohol and rising duties on beer, wine and spirits.
"We are confident that our community-driven pub business model will remain robust at a time when consumers are more cautious with their
leisure spend."
--END--
Enquiries
Pubs 'n' Bars Plc Tel: 020 8228 4800
Mel Belligero, Chief Executive
Daniel Stewart & Company Plc Tel: 020 7776 6550
Paul Shackleton
Bishopsgate Communications Ltd Tel: 020 7562 3350
Neil Boom /Nick Farmer
pubsnbars@bishopsgatecommunications.com
CHAIRMAN'S STATEMENT
I am pleased to report your Company's final results for the year ended 31 December 2007. This is the first report prepared under
International Financial Reporting Standards ('IFRS'). Previous results were prepared using UK Generally Accepted Accounting Principals ('UK
GAAP'). Accordingly, the results for the comparable period in 2006 have been restated from UK GAAP to IFRS.
Revenues for the year increased by 30 per cent to �19,996,881 (2006: �15,329,204), boosted by the acquisitions of Moorgate London
Limited, Community Taverns Limited and Moorgate Taverns Limited. The details of these acquisitions were reported to shareholders on 5 April,
9 May and 5 December 2007 respectively.
Financial Review
Applying IFRS, pre-tax profits for the year rose by 107% to �1,025,108 (2006: �495,092) and EBITDA rose by 50 per cent to �3,171,640
(2006: �2,107,494). Basic earnings per share were considerably improved at 5.30p (2006: 2.32p).
Overview of Performance 2007 2006
� �
Total sales 19,996,881 15,329,204
Operating profit 2,811,011 1,815,371
Underlying operating profit 2,679,759 2,388,392
Net interest charges 1,785,903 1,320,279
Underlying profit before tax 893,856 1,068,113
Exceptional items 131,252 (573,021)
Profit before tax 1,025,108 495,092
Underlying operating profit refers to profit excluding exceptional items. These exceptional items, which are incorporated within
administration expenses on the income statement, include; negative goodwill on the acquisition of Moorgate Taverns Ltd, property revaluation
and movement in fair value of interest rate swaps. Underlying operating profit was 12.2% higher than last year. Net interest charges were
�465,624 higher due to increased borrowings to finance the acquisitions. After taking account of interest, underlying profit, before tax,
fell by 16.3% to �893,856.
Exceptional items of �131,252 comprised negative goodwill on the acquisition of Moorgate Taverns Ltd of �725,254, a revaluation deficit
of (�549,002) and movement in fair value of interest rate swaps of (�45,000).
The (�573,021) of exceptional items incurred in 2006 comprised a revaluation deficit of (�1,116,575), surplus in fair value of interest
rate swaps of �442,000 and reversal of goodwill amortisation of �101,554.
Faced with the current uncertainty surrounding the broader economic environment and the difficulty with accurately forecasting short
term earnings, The Board recommends a final dividend of 0.5p which will be paid on 31 July 2008 to shareholders on the register on 4 July
2008. This final dividend together with the interim dividend already paid of 0.75p makes a total of 1.25p per share for the year ended 31
December 2007 (2006: 1.75p per share). The ex-dividend date will be 2 July 2008.
The decision to reduce the dividend was not taken lightly, however The Board of Directors took the decision based upon a balanced and
responsible approach to the requirements of the business going forward in the current climate.
The Pub Estate
Following the acquisitions mentioned above, our estate has increased to 106 pubs. As at 31 December 2007, our enlarged estate
comprised:
Freehold 53 Managed 64
Leasehold 53 Tenanted 42
We intend to pursue our strategy of acquisitions, either of single or multiple establishments where attractive terms can be agreed. We
will also continue to look to take profits on property disposals. We believe that our experience in both the property and licensed sectors
enables us to increase shareholder value despite the apparent weakness in property values and the rising cost of borrowing. Underperforming
assets have been, and always will be, treated unsentimentally and will be disposed of as necessary.
Sector Backdrop
We are approaching the anniversary of the smoking ban which came into effect on 1 July 2007. As shareholders are aware, we were very
well prepared for the ban, and had invested sizeable sums in heated and covered outdoor areas prior to the ban's introduction.
Since the beginning of the smoking ban, and despite our preparations, we have seen a fall in like for like revenues of 5%, and we
believe the majority of this is directly attributable to the ban. To put this in a wider context, other listed pub operators have estimated
falls of between 3% and 10%.
It is, however, difficult to work out precisely how much trade has been lost to the smoking ban, and how much is attributable to the
impact of alcohol duty, and of course, the largest threat to our business, which is competition from cut price supermarket alcohol sales.
Current Trading and Prospects
Current trading continues to be affected by both the smoking ban and the well-publicised credit squeeze leading to customer belt
tightening on discretionary spending, including leisure activities.
First quarter turnover was below budget by approximately 2% mainly due to the full effect of the smoking ban taking hold in the winter
months and an early and snowy Easter leading to lower than expected sales during the holiday.
That said, we are optimistic that we will enjoy a better summer than last year, which recorded the wettest June and July since records
began in 1956.
Looking further forward, despite the current sector challenges, over the longer term, we remain confident that running convivial,
non-fashion dependent pubs is a resilient business with good growth prospects.
In closing, I would like to extend my thanks to our staff and my colleagues for their continued hard work and dedication.
S. Murphy
Chairman
Date 5 June 2008
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31ST DECEMBER 2007
2007 2006
Restated*
Notes � � �
REVENUE
Continuing operations 14,624,037
Acquisitions 5,372,844
TOTAL REVENUE 19,996,881 15,329,204
Cost of sales
Continuing operations 4,501,942
Acquisitions 2,045,778
TOTAL COST OF SALES (6,547,720) (4,842,006)
GROSS PROFIT 13,449,161 10,487,198
Administrative expenses
Continuing operations 7,981,438
Acquisitions 2,712,930
TOTAL ADMINISTRATIVE EXPENSES (10,694,368) (8,730,092)
Other operating income
Continuing operations 13,543
Acquisitions 42,675
TOTAL OTHER OPERATING INCOME 56,218 58,265
OPERATING PROFIT 2,811,011 1,815,371
Finance cost
Continuing operations 8 1,820,100
Acquisitions -
TOTAL FINANCE COSTS (1,820,100) (1,427,236)
Investment income
Continuing operations 28,076
Acquisitions 6,121
TOTAL INVESTMENT INCOME 34,197 106,957
PROFIT BEFORE TAXATION 1,025,108 495,092
Taxation 9 594,221 95,586
PROFIT FOR THE PERIOD 1,619,329 590,678
EARNINGS PER SHARE
Basic - from continuing and 10 5.30p 2.32p
total operations
Diluted - from continuing and 10 5.06p 2.23p
total operations
*For reconciliation of 2006 restated figures see note 20a. CONSOLIDATED BALANCE SHEET
AS AT 31ST DECEMBER 2007
2007 2006
Restated*
Notes � �
ASSETS
Non-current assets
Property, plant and equipment 14 55,867,000 34,850,749
Intangible fixed assets 15 1,638,816 1,445,624
Investments 16 - 729,522
Deferred tax assets 1,668,894 1,093,103
59,174,710 38,118,998
Current assets
Inventories 17 751,617 582,938
Trade and other receivables 18 2,157,544 2,034,950
Cash and cash equivalents 136,923 53,092
3,046,084 2,670,980
TOTAL ASSETS 62,220,794 40,789,978
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 19 7,934,671 5,099,442
Share premium account 7,192,665 5,131,869
Revaluation reserve 4,550,775 4,460,560
Retained earnings 2,507,877 1,424,803
TOTAL EQUITY 22,185,988 16,116,674
Non-current liabilities
Long-term borrowings 34,244,410 19,830,056
Finance lease liabilities 6,040 10,412
Derivative financial instruments 258,000 213,000
Deferred tax liabilities 2,112,044 2,112,039
36,620,494 22,165,507
Current liabilities
Trade and other payables 3,019,403 1,813,420
Short-term borrowings 370,638 449,007
Current tax payable 20,511 241,206
Finance lease liabilities 3,760 4,164
3,414,312 2,507,797
TOTAL EQUITY AND LIABILITIES 62,220,794 40,789,978
*For reconciliation of 2006 restated figures see note 20b.
Approved by the Board on 5 June 2008 and signed on its behalf by :
S. MURPHY
Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31ST DECEMBER 2007
2007 2006
Notes � �
Cash flows from operating activities
Profit/(Loss) before taxation 1,025,108 495,092
Adjustments for:
Investment income (34,197) (165,222)
Interest expense 1,820,100 1,427,236
Profit on disposal of fixed assets (56,218) -
Decrease in value of leasehold property 549,002 1,116,575
Derivative financial instrument fair value adjustment 45,000 (442,000)
Depreciation 360,629 292,124
Discount on acquisition of Moorgate Taverns Limited (725,254) -
Recognition of loan to Community Taverns Limited 729,522 -
Decrease in inventories 54,039 104,960
Decrease in trade and other receivables 786,763 428,452
(Decrease) in trade payables (1,662,026) (268,059)
Cash generated from operations 2,892,468 2,989,158
Interest paid (1,610,451) (1,102,380)
Tax (received)/paid (237,345) (258,375)
NET CASH FROM OPERATING ACTIVITIES 1,044,672 1,628,403
Cash flows from investing activities
Purchase of tangible fixed (865,352) (1,043,081)
assets
Acquisition of subsidiary net of 13 (3,949,246) -
cash acquired
Proceeds of sale of tangible fixed assets 114,394 83,265
Purchase of investments - (6,963)
Interest received 34,197 106,957
NET CASH FROM INVESTING ACTIVITIES (4,666,007) (859,822)
Cash flows from financing activities
Proceeds from issue of shares 1,309,525 -
Net drawdown/(repayment) of borrowings 2,770,929 (374,995)
Payment of finance lease (4,776) (3,085)
liabilities
Dividends paid 11 (555,568) (446,201)
NET CASH FROM FINANCING ACTIVITIES 3,520,110 (824,281)
NET (DECREASE) IN CASH
AND CASH EQUIVALENTS (101,225) (55,700)
Cash and cash equivalents at beginning of period (116,619) (60,919)
CASH AND CASH EQUIVALENTS AT END (217,844) (116,619)
OF PERIOD
REPRESENTED BY:
Cash at bank and in hand 136,923 53,092
Bank overdrafts (354,767) (169,711)
(217,844) (116,619)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31ST DECEMBER 2007
Ordinary Share Revaluation Retained Total
Share Premium Reserve Earnings Equity
Capital
� � � � �
Balances at 1st January 2007 5,099,442 5,131,869 4,460,560 1,424,803 16,116,674
Changes in equity:
Gain on property revaluation - - 125,297 - 125,297
Issues of share capital 2,835,229 2,151,538 - - 4,986,767
Costs of issue of share - (90,742) - - (90,742)
capital
Share options issued - - - 19,403 19,403
Profit for the period - - - 1,619,329 1,619,329
Deferred tax arising on - - (35,082) - (35,082)
revaluation
Dividends paid - - - (555,658) (555,658)
Balances at 31st December 2007 7,934,671 7,192,665 4,550,775 2,507,877 22,185,988
Ordinary Share Revaluation Retained Total
Share Premium Reserve Earnings Equity
Capital
� � � � �
Balances at 1st January 2006 5,099,442 5,131,869 3,391,735 1,280,326 14,903,372
Changes in equity:
Gain on property revaluation - - 1,526,892 - 1,526,892
Profit for the period 590,678 590,678
Deferred tax arising on - - (458,067) - (458,067)
revaluation
Dividends paid - - - (446,201) (446,201)
Balances at 31st December 2006 5,099,442 5,131,869 4,460,560 1,424,803 16,116,674
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST DECEMBER 2007
1. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
applied consistently to all the years presented, unless otherwise stated, and in preparing an opening IFRS balance sheet at 1 January 2006
for the purpose of transition to IFRS.
Basis of Preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB), under the historical cost convention. The measurement basis is the
historical cost convention and the principal accounting policies are set out below.
The policies have changed from the previous year when the financial statements were prepared under applicable UK GAAP. The comparative
information has been restated in accordance with IFRS. The changes to accounting policies are explained in note 29, together with the
reconciliation of opening balances. The date of transition to IFRS was 1 January 2006. The accounting policies that have been applied in the
opening balance sheet have also been applied throughout all periods presented in these financial statements.
A separate profit and loss account for the parent company has not been presented as permitted by section 230(4) of the Companies Act
1985. The parent company earned a profit of �31,512 (2006: � 928,846).
IFRS effective in 2007 but not relevant
The following interpretations were mandatory for the groups accounting period, but are not relevant to the operations of the group.
* IFRIC 7 Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies;
* IFRIC 9 Reassessment of embedded derivatives.
EU adopted IFRS not yet applied
The following standards and interpretations were issued and available for early application but have not yet been applied by the group
in these financial statements.
The group intends to apply these standards and interpretations when they become effective:
* IFRS 8 Operating segments;
* IAS 23 (Amendment) Borrowing costs.
IFRS 8 replaces IAS 14 'Segment Reporting' and requires the group to adopt the 'management approach' to reporting on the financial
performance of its operating segments. Generally, the information to be reported would be what management uses internally for evaluating
segment performance and deciding how to allocate resources to operating segments. The new standard will significantly change the way
segmental information is currently reported. Goodwill, which is presently allocated to cash-generating units based on reportable segments,
will also need to be reallocated based on the new reportable segments. It is managements' opinion that the reallocation will not result in
any further impairment charges against goodwill.
IAS 23 amendment to change the previous version of the standard by removing the option to expense borrowing costs that relate to assets
that take a substantial period of time to get ready for use or sale. Such borrowing costs will in future be required to be included in the
cost of the fixed asset or inventory item to which they relate. The amendment will not affect the group results as the group currently
adopts a policy of capitalising borrowing costs to qualifying assets.
Exemptions taken on first time adoption of IFRS1
Basis of Consolidation
The financial information incorporates the results of the company and entities controlled by the company (its subsidiaries). Control is
achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from
its activities.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Financial statements of the subsidiaries are prepared
to the same year end, 31st December, except for Moorgate Taverns Limited.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business Combinations and Goodwill
Goodwill on acquisitions comprises the excess of the fair value of the consideration plus any associated costs for investments in
subsidiary undertakings over the fair value of the net identifiable assets acquired. Adjustments are made to fair values to bring the
accounting policies of acquired businesses into alignment with those of the group. The costs of integrating and reorganising acquired
businesses are charged to the post acquisition income statement.
Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold. Negative goodwill is recognised immediately in
the income statement.
Revenue Recognition
Revenue is the value of goods and services sold to third parties as part of the Group's trading activities, after deducting sales based
taxes, coupons and staff discounts. The majority of revenue comprises food and beverages sold in the Group's outlets. This revenue is
recognised at the point of sale to the customer. Revenue arising from the sale of property is recognised on legal completion of the sale.
Investment income is recognised upon a receivable basis.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax. The tax currently payable is based on the
estimated taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items
of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. The deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred
income tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where
the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Share-based Payments
The cost of share-based payment arrangements, whereby employees receive remuneration in the form of shares or share options, is
recognised as an employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value at the date of
grant. The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non market-based
vesting conditions prevailing at the balance sheet date. Fair value is measured by the use of Black-Scholes option pricing model and is
based on a reasonable expectation of the extent to which performance criteria will be met.
Property, Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as
to write off the costs of assets, over their estimated useful lives, using the straight-line method, on the following bases:
Fixtures and fittings 10% straight line
Computers and EPOS 20% straight line
Motor vehicles 25% straight line
The property assets of the Group are stated at revalued amounts, being fair value at the date of revaluation less accumulated impairment
losses. Increases in the value of revalued assets are recognised in the revaluation reserve except to the extent they relate to a previous
decrease in value which had been charged to the income statement. Decreases in value are taken to the revaluation reserve to the extent of
any pre-existing surplus on that individual asset; decreases in excess of any pre-existing surplus are taken to the income statement.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and if events or
changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to depreciation or amortisation
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review
for indicators of impairment is performed annually. An impairment loss is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any
impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment
loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Trade and other receivables
Trade receivables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash
receipts over the short credit period is not considered to be material. Trade receivables are reduced by appropriate allowances for
estimated irrecoverable amounts. Interest on overdue trade receivables is recognised as it accrues.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short-term highly liquid deposits with an original maturity at
acquisition of three months or less. Cash held on deposit with an original maturity at acquisition of more than three months is disclosed as
current asset investments. For the purposes of the cash flow statement, cash and cash equivalents consists of cash and cash equivalents as
defined above, net of bank overdrafts that are repayable on demand and that are integral to the Group's cash management.
Trade payables
Trade payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be material.
Derivative financial instruments
The Group's policy is to hedge a proportion of its variable rate borrowings at fixed rates of interest. To achieve this, the Group
enters into interest rate swap contracts in which the Group agrees to exchange its variable rate obligations for fixed rate obligations.
Although not accounted for as being hedge effective, the swaps are held for risk management purposes and not for trading purposes. These
swaps are defined as cash flow hedges and the fair values are determined by discounting the future cash flows using the mid point of the
sterling yield curve prevailing at the year end.
Interest-bearing borrowings
Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method
of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability.
Provisions
Provisions are recognised in the balance sheet when there is 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.
Leases
Leases of plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance
leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property and the present value
of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on
the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The
interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the asset's useful life and the lease term.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made
under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
Rental income received under operating leases is credited to the income statement on a straight line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. It
excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable
selling expenses.
Pensions
The Group operates a defined contribution pension plan. The scheme is funded through payments to insurance companies.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior periods.
For a defined contribution plan, the Group pays contributions to publicly or privately administered pension insurance plans on a
contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at
the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. The significant judgments made by management in applying the
Group's accounting policies and the key sources of estimation were:
* Impairment of goodwill. Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash
flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value.
* Non-depreciation of assets. The Directors believe that the following factors are relevant to the group's public house estates,
which mitigate the need to apply depreciation to these assets:
* The company has a policy of regular maintenance and repair such that the properties are retained at the previously assessed
standard of performance;
* The properties are unlikely to suffer from technical or commercial obsolescence;
* The company, as a commercial enterprise, has a policy and practice of disposing of similar assets well before the end of their
useful lives and historically the disposal proceeds of similar asset have not been materially less than their carrying value.
Therefore the directors consider that it is not necessary to depreciate the property assets owned.
3. SEGMENTAL REPORTING
The Directors' consider that there are two main classes of business; managed house income and tenanted house income.
Managed house income comprises the sale of liquor, catering services, vending machine income, and cigarette commission. This class of
business accounts for 85% of reported turnover for 2007. Therefore the Directors do not consider it necessary to produce a segmental
report.
All income is derived from the within United Kingdom.
4. OPERATING PROFIT 2007 2006
� �
Group operating profit for the year is stated
after the following:
Depreciation of owned tangible fixed assets 357,629 279,624
Depreciation of assets held under finance leases 3,000 12,500
Operating lease expense - land and buildings 2,155,642 1,569,792
And after crediting:
Rental income 804,368 726,591
Profit on disposal 56,218 58,265
5. AUDITORS' REMUNERATION 2007 2006
� �
Fees payable to the group's auditor for the audit of 49,000 22,000
the group's annual financial statements
Fees payable to the group's auditor and its associates
for other services:
Corporate finance - 5,000
Tax services 4,500 3,000
Other services (non-audit) 900 20,500
6. STAFF COSTS 2007 2006
� �
Staff costs comprised:
Wages and salaries 910,952 1,119,692
Social security costs 76,018 102,863
Other pension costs 29,895 31,552
1,016,865 1,254,107
The average monthly number of employees, employed by the group, including directors during
the year can be categorised
as follows: Number Number
Administration employees 23 27
Pub employees 60 56
83 83
7. DIRECTORS EMOLUMENTS 2007 2006
� �
Emoluments 347,791 353,701
Pension costs 17,689 16,870
365,480 370,571
The number of directors accruing benefits under money purchase scheme were 2 (2006:
2).
Highest paid
director:
Emoluments 150,336 144,526
Pension costs 10,769 10,290
161,105 154,816
8. FINANCE COSTS 2007 2006
� �
Bank overdraft and loans 1,846,936 1,306,838
Interest rate hedging (26,836) 120,398
1,820,100 1,427,236
9. TAXATION 2007 2006
� �
Current tax charge 16,648 343,868
Adjustments relating to prior periods - (87,565)
16,648 256,303
Deferred tax (14,699) (16,917)
Recognition of deferred tax asset (note 21) (422,070) -
Deferred tax released on revaluations (153,721) (334,972)
Deferred tax released on reduction in future in (20,379) -
tax rate
Total tax credit for the period (594,221) (95,586)
Profit on ordinary activities before tax 1,025,108 495,092
Tax on profit at 30% (2006: 30%) 307,533 148,528
Effect of:
Small companies rate relief (8,635) (8,912)
Expenses not deductible for tax purposes 4,351 5,471
Accelerated capital allowances 687 (3,100)
Relief for losses brought forward (159,719) -
Group tax adjustments (127,569) 29,975
IFRS adjustment - 171,906
Adjustments to tax charge in respect of previous - (87,565)
periods
16,648 256,303
10. EARNINGS PER SHARE 2007 2006
� �
Earnings from
continuing and total
operations
Earnings for the 1,619,329 590,678
purpose of basic and
diluted earnings per
share being net
profit attributable
to equity
shareholders
Number of Shares
Weighted average 30,575,127 25,497,207
number of ordinary
shares for the
purpose of basic
earnings per share
Weighted average 31,978,267 26,534,867
number of ordinary
shares
for the purpose of
dilutive earnings
per share
The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary
shares, all of which arise from share options. A calculation is performed to determine the number of shares
that could have been acquired at fair value, based upon the monetary value of the subscription rights
attached to outstanding share options.
11. DIVIDENDS 2007 2006
� �
Dividends paid 555,658 446,201
during the year
Dividends per share 1.75p 1.75p
Final dividend 199,142 317,519
declared after year
end
Final dividend per 0.50p 1p
share
The final dividend has not been included as a liability in these financial statements. It was declared after
year end but before the financial statements were authorised for issue.
12. SHARE BASED PAYMENTS
a) Share Options and Warrants
The following share options issued to directors existed at the year end in respect of approved and unapproved schemes.
Option At
Granted Lapsed At
Directors Name Date Granted Price 1.1.2007 in
2007 in 2007 31.12.2007
C. Belligero 13 October 1999 45p 200,000
200,000
3 October 2000 48p 52,166
52,166
15 October 2001 37p 40,000
40,000
1 October 2002 30p 350,000
350,000
29 September 2003 42p 15,000
15,000
19 July 2006 41.5p 300,000
300,000
19 September 2007 41.5p
90,000 90,000
24 October 2007 39p
253,000 253,000
K.J. Chapman 29 September 2003 42p 5,000
(5,000) -
S. Namasivayam 27 September 1999 48p 42,500
42,500
3 October 2000 48p 12,292
12,292
15 October 2001 37p 10,000
10,000
1 October 2002 30p 20,000
20,000
29 September 2003 42p 9,928
9,928
6 October 2006 47p 90,000
90,000
19 September 2007 41.5p
90,000 90,000
24 October 2007 39p
144,800 144,800
b) The following share options existed at the year end in respect of approved and unapproved schemes for staff and have been granted to
subscribe for ordinary shares of the company as
follows:
Option At
Granted Lapsed At
Date Granted Price 1.1.2007 in
2007 in 2007 31.12.2007
27 September 1999 48p 17,500
17,500
3 October 2000 48p 30,000
30,000
15 October 2001 37p 25,000
(5,000) 20,000
1 October 2002 30p 22,000
(5,000) 17,000
29 September 2003 42p 16,000
16,000
6 October 2006 47p 10,000
10,000
19 September 2007 41.5p
25,000 25,000
24 October 2007 39p
42,500 42,500
Number of shares Subscription
under option price per share Exercise period
60,000 48p 27/09/2002 -
27/09/2009
200,000 45p 13/10/2002 -
13/10/2009
94,458 48p 03/10/2003 -
03/10/2010
70,000 37p 15/10/2004 -
15/10/2011
387,000 30p 01/10/2005 -
01/10/2012
40,928 42p 29/09/2006 -
29/09/2013
300,000 41.5p 19/07/2009 -
19/07/2016
100,000 47p 06/10/2009 -
01/10/2016
205,000 41.5p 19/09/2010 -
19/09/2017
440,300 39p 24/10/2010 -
24/10/2017
There are no Performance Restricted Share Plans in place.
c) Share based payments
The company recognised the following total expenses and costs in respect
of payments settled by options in the period:
Recognised immediately and charged as an expense to �10,613
the profit and loss account
The total fair value of options granted in the �25,812
period was
The inputs into a modified Black-Scholes model used
to calculate the fair values as well as the share
price at date of grant are:
Expected volatility 25%
Expected life 5 years
Discount for smaller listed company 20%
Dividend yield 7.44%
d) Weighted average exercise price
The weighted average exercise prices for the following groups of options are as follows:
Pence
Outstanding at 1st January 2007 39.47
Granted during the period 39.79
Lapsed during the period 36.33
Outstanding at the end of the period 39.61
Exercisable at the end of the period -
13. ACQUISITION OF SUBSIDIARIES
On 10th April 2007 the Group acquired 100% of the issued capital of Moorgate London Limited for �2,339,500 net of costs of
acquisition. The interim accounts
showed �6,639,500 as the cost of acquisition. This included �4,300,000 of borrowings that were assumed by Pubs 'n' Bars plc on
acquisition. The company holds an
estate of seven freehold pubs within Hertfordshire and Oxfordshire. At the date of acquisition the company ceased trading and all
trade was transferred to Pubs
'n' Bars Plc. Since the date of acquisition up to 31st December 2007 the subsidiary contributed an estimated profit of �100,916. If
the acquisition had occurred
on 1st January 2007 management estimates that consolidated revenue would have been �428,425 and the consolidated profit for the period
would have been �138,617.
In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have
been the same if the
acquisition on 1st January 2007.
On 9th May 2007 the Group acquired 85% of the issued capital of Community Taverns Limited for �2,350,334 in cash satisfied by bank
borrowings net of costs of
acquisition. This figure is �99,666 lower than stated in the interim accounts due conditions being met to qualify for a purchase price
reduction of the same
amount. The Group acquired 15% of Community Taverns Limited in December 2003 for �150. The company held an estate of one freehold and
24 leasehold pubs. Since
acquisition, prior to the year end, one leasehold was pub was disposed. Since the date of acquisition up to 31stDecember 2007 the
subsidiary contributed profit
of �662,932. If the acquisition had occurred on 1st January 2007 management estimates that consolidated revenue would have been
�8,483,992 and the consolidated
profit for the period would have been �825,957. In determining these amounts, management has assumed that the fair value adjustments
that arose on the date of
acquisition would have been the same if the acquisition has taken p
On 12th December 2007 the Group acquired 100% of the issued share capital of Moorgate Taverns Limited for �2,197,000 net of costs
of acquisition. The company
holds an estate of ten freehold pubs. The accounting date for the company is 11th December. It is to be brought in line
with the Group. At the date of
acquisition the company ceased trading and all trade was transferred to Pubs *n* Bars Plc. Since the date of acquisition up to 31st
December 2007 the subsidiary
contributed an estimated profit of �32,804. If the acquisition had occurred on 1st January 2007 management estimates that
consolidated revenue would have been
�741,792 and the consolidated profit for the period would have been �598,681. In determining these amounts, management has
assumed that the fair value
adjustments that arose on the date of acquisition would have been the same if the
acquisition on 1st January 2007.
Upon acquisition Moorgate London Limited and Moorgate Taverns Limited ceased trading and all trade
was transferred to Pubs *n*
Moorgate London Community Moorgate
Total
Ltd. Taverns Ltd. Taverns Ltd.
� � �
�
Cash and cash equivalents - 328,442 6,015
334,457
acquired
Inventories - 222,718 -
222,718
Accounts receivable - 863,868 45,489
909,357
Property, plant and equipment 7,050,000 3,500,602 10,423,494
20,974,096
Trade and other payables - (2,401,682) (256,678)
(2,658,360)
Borrowings (4,300,000) - (7,080,000)
(11,380,000)
2,750,000 2,513,948 3,138,320
8,402,268
Goodwill on acquisition 34,211 158,978 (725,254)
(532,065)
Total consideration 2,784,211 2,672,926 2,413,066
7,870,203
The book values of the assets and liabilities at the dates of acquisition are deemed to be the same as the fair values above.
The negative goodwill arising on the acquisition of Moorgate Taverns Limited of �725,254 has been recognised within Administration expenses
in the income
statement, as required by IFRS 3 "Business Combinations". This represents the excess of the fair value above total consideration.
Moorgate London Community Moorgate
Total
Ltd. Taverns Ltd. Taverns Ltd.
� � �
�
Total consideration can be broken down as follows:
Cash 650,000 2,350,334 300,000
3,300,334
Share issue 1,689,500 - 1,897,000
3,586,500
2,339,500 2,350,334 2,197,000
6,886,834
Legal and professional fees 191,111 285,327 205,241
681,679
Stamp duty 232,100 12,265 10,825
255,190
Bank charges 21,500 25,000 -
46,500
Total consideration 2,784,211 2,672,926 2,413,066
7,870,203
On 4th April 2007 the company issued 3,929,070 shares at 43p per share to the vendors for the acquisition of Moorgate London Limited.
On 11th December 2007 the company issued 6,541,375 shares at 29p per share to the vendors for the acquisition of Moorgate Taverns Limited.
The issued share price was the prevailing market value at the date of issue.
Moorgate London Community Taverns Ltd. Moorgate
Total
Ltd. Taverns Ltd.
� � �
�
Net cash outflow on acquisition were as follows:
Total purchase consideration 2,784,211 2,672,926 2,413,066
7,870,203
Less: non-cash consideration (1,689,500) - (1,897,000)
(3,586,500)
Consideration paid in cash 1,094,711 2,672,926 516,066
4,283,703
Less: Cash and cash equivalents acquired - (328,442) (6,015)
(334,457)
1,094,711 2,344,484 510,051
3,949,246
14. PROPERTY, PLANT AND EQUIPMENT
GROUP Freehold Long Short
Fixtures Motor Total
Land & Leasehold Leasehold
& Vehicles
Property Property
Fittings
� � �
� � �
COST/VALUATION
At 1st January 2006 23,615,381 1,050,296 7,671,297
2,627,826 18,380 34,983,180
Additions 441,774 - 384,610
216,697 - 1,043,081
Reclassification 1,783,242 27,499 (1,810,741)
- - -
Surplus/(Deficit) on 1,813,481 153,371 (1,556,535)
- - 410,317
revaluation
Disposals - - (16,039)
(14,916) (7,380) (38,335)
At 1st January 2007 27,653,878 1,231,166 4,672,592
2,829,607 11,000 36,398,243
Additions 266,950 2,607 371,110
224,685 - 865,352
Surplus/(Deficit) on (304,043) (110,081) (9,581)
- - (423,705)
revaluation
Acquired through 17,941,650 - 2,564,859
467,587 - 20,974,096
business combination
Disposals - - (20,348)
(20,300) - (40,648)
At 31st December 45,558,435 1,123,692 7,578,632
3,501,579 11,000 57,773,338
2007
DEPRECIATION
At 1st January 2006 - - -
1,250,951 17,754 1,268,705
Charge for the - - -
291,498 626 292,124
period
Released on disposal - - -
(5,955) (7,380) (13,335)
At 1st January 2007 - - -
1,536,494 11,000 1,547,494
Charge for the - - -
360,629 - 360,629
period
Released on disposal - - -
(1,785) - (1,785)
At 31st December - - -
1,895,338 11,000 1,906,338
2007
NET BOOK VALUE
At 1st January 2006 23,615,381 1,050,296 7,671,297
1,376,875 626 33,714,475
At 1st January 2007 27,653,878 1,231,166 4,672,592
1,293,113 - 34,850,749
At 31st December 45,558,435 1,123,692 7,578,632
1,606,241 - 55,867,000
2007
The public houses, which are freehold and leasehold, are included at market valuation. Annual impairment reviews are performed. Where
the residual value is considered to have fallen, the reversal of previous upward revaluations on that
asset will maintain the value of the asset in the company's books at an amount equivalent to the residual value of the asset.
Included above are assets held under finance leases:
Net Book Depreciation
Value Charge for the year �
�
Fixtures and fittings
15,000 3,000
The property assets of the group, including fixtures and fittings, were valued at 31st December 2007 by Davis Coffer Lyons Limited,
Chartered Surveyors, who are external to the group, at an open market value on an existing use basis.
The historical cost carrying amount would be �53,562,154 (2006: �32,122,198).
15. INTANGIBLE FIXED Goodwill
ASSETS
�
COST
At 1st January 2006 2,031,071
and 1st January 2007
Additions 193,189
At 31st December 2,224,260
2007
IMPAIRMENT LOSSES
At 1st January 2006 585,447
Impairment loss -
At 1st January 2007 585,447
Impairment -
At 31st December 585,447
2007
NET BOOK VALUE
At 1st January 2006 1,445,624
At 1st January 2007 1,445,624
At 31st December 1,638,813
2007
The goodwill addition relates to the acquisitions in the year (note 13) of Moorgate
London Limited (�34,211), Community Taverns Limited (�158,978). The negative goodwill
arising on the acquisition of Moorgate Taverns Limited of �725,254 has been recognised
in the income statement, as required by IFRS 3 "Business Combinations".
16. INVESTMENTS
2007 2006
Fixed Asset Investments � �
(a) Investments other than loans - 150
(b) Other loans - 729,372
- 729,522
a) Investments other than loans
Cost �
At 1st January 2006 and 1st January 2007 150
Released on acquisition (150)
At 31st December 2007 -
b) Other loans
Cost �
At 1st January 2006 722,409
Additions 6,963
At 1st January 2007 729,372
Recognition of loan (729,372)
At 31st December 2007 -
17. INVENTORIES
2007 2006
� �
Goods for resale 751,617 582,938
18. TRADE AND OTHER RECEIVABLES
2007 2006
� �
Trade receivables 324,509 372,445
Other debtors 1,039,930 1,075,662
Prepayments and accrued income 793,105 586,843
2,157,544 2,034,950
19. SHARE CAPITAL 2007 2006
� �
Authorised:
Number of shares 50,000,000 37,500,000
Ordinary shares of 10,000,000 7,500,000
20p each
Issued, called up,
allotted and fully
paid:
Number of shares 39,673,358 25,497,207
Ordinary shares of 7,934,671 5,099,442
20p each
On 4th April 2007 the company issued 6,254,652 ordinary shares at 43 pence per share in order to finance the
acquisition of Moorgate London Limited.
On 11th December 2007 the company issued 7,921,499 ordinary shares at 29 pence per share in order to finance
the acquisition of Moorgate Taverns Limited.
During the period the Group increased the authorised ordinary share capital by 12.5 million shares of 20p
each to give the Group more financial flexibility to raise finance for future acquisitions.
The costs of the shares during the year amounted to �90,742 and have been treated as a deduction from the
share premium account.
Each ordinary share carries equal voting rights and is entitled to an equal share of distributable profits
and repayment of capital.
20. TRANSITION TO IFRS
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial statements in accordance with UK generally accepted accounting
practice (UK GAAP). The financial statements for the year ended 31 December 2007 were
the first the Group was required to prepare in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union.
The accounting policies set out above and the other restatements required by IFRS 1
"First time adoption of IFRS" have been applied in preparing the financial statements
for the year ended 31 December 2007, the comparative information presented in these
financial statements for the year ended 31 December 2006 and in the preparation of the
opening IFRS balance sheet at 1 January 2006.
In preparing its opening IFRS balance sheet, the group has adjusted amounts previously
reported in financial statements prepared in accordance with UK GAAP. An explanation
of how the transition from UK GAAP to IFRS has affected the group's financial
position, financial performance and cash flows is set out in the following tables and
notes.
IFRS 1 "First time adoption of IFRS" sets out the procedures that the Group must
follow when it adopts IFRS for the first time as the basis for preparing its
consolidated financial statements. The Group is required to establish its accounting
policies for the year ending 31 December 2007 and, in general, apply these
retrospectively to determine the IFRS opening balance sheet at its date of transition,
1 January 2006.
Deferred Tax
Under UK GAAP deferred tax liabilities on revaluation reserves were not
provided for unless the Group entered into a binding contract to sell the
revalued assets. Under IAS12 deferred tax must be provided for. Deferred
tax charged of �1,911,688 on revaluations prior to 31st December 2006 has
been charged directly to the revaluation reserves in line with IAS12. The
opening IFRS balance sheet has also been adjusted by �1,453,601 for
revaluations prior to 1st January 2006.
Fair Value of Derivative Financial Instruments
In line with IAS 39 "Financial Instruments: Recognition and Measurement"
the fair value of the Group's interest rate swaps has been recognised in
the balance sheet, and any changes in value have been recognised in the
income statement. The adjustments reflected in these reconciliations are
to present the negative �655,000 fair value as at 1st January 2006, and
the negative �213,000 fair value as at 31st December 2006.
Revaluations
IAS 16 "Property, plant and equipment" requires that revaluation
increases on an asset are to be credited directly to revaluation surplus
or income statement to the extent that the increase reverses a
revaluation decrease of the same asset previously recognized in the
income statement. Revaluation deceases are to be recognized in the income
statement in the event they exceed any credit balance in the revaluation
surplus in respect of the asset concerned, whereas under UK GAAP
revaluation decreases could be debited to the revaluation reserve to the
extent they were not considered to represent a consumption of economic
benefit This change in treatment has lead to a transfer from the income
statement to the revaluation reserve as at 1st January 2006 of �2,527,102
and a similar transfer of �1,116,575 for the year ended 31st December
2006.
a) Reconciliation of consolidated income for the year ended 31st December
2006
UK GAAP Goodwill Fair value Deferred tax Revaluations IFRS
Amortise
d
� � � � �
Revenue 15,329,204 - - - - 15,329,204
Cost of sales (4,842,006) - - - - (4,842,006)
-
GROSS PROFIT 10,487,198 - - - - 10,487,198
Other operating income 58,265 - - - - 58,265
Administrative expenses (8,157,071) 101,554 442,000 - (1,116,575) (8,730,092)
Finance cost (1,427,236) - - - - (1,427,236)
Investment income 106,957 - - - - 106,957
PROFIT BEFORE TAXATION 1,068,113 101,554 442,000 - (1,116,575) 495,092
Taxation (239,386) - 334,972 - 95,586
PROFIT FOR THE PERIOD 828,727 101,554 442,000 334,972 (1,116,575) 590,678
EARNINGS PER SHARE
Basic 3.25p 2.32p
Diluted 3.12p 2.23p
b) Reconciliation of consolidated balance sheet and equity at 31st December
2006
UK GAAP Goodwill Fair Value Deferred Re-valuations IFRS
Amortise Tax
d
� � � � � �
Assets
Non-current assets
Property, plant and equipment 34,850,749 - - - - 34,850,749
Intangible assets 1,344,070 101,554 - - - 1,445,624
Investments 729,522 - - - - 729,522
Deferred tax asset - - - 1,093,103 - 1,093,103
36,924,341 101,554 - 1,093,103 - 38,118,998
Current assets
Inventories 582,938 - - - - 582,938
Trade receivables 2,034,950 - - - - 2,034,950
Cash and cash equivalents 53,092 - - - - 53,092
2,670,980 - - - - 2,670,980
TOTAL ASSETS 39,595,321 101,554 - 1,093,103 - 40,789,978
Equity and Liabilities
Capital and reserves
Ordinary share capital 5,099,442 - - - - 5,099,442
Share premium account 5,131,869 - - - - 5,131,869
Revaluation reserve 2,728,551 - - (1,911,668) 3,643,677 4,460,560
Retained earnings 4,086,823 101,554 1,093,103 (3,643,677) 1,424,803
(213,000)
TOTAL EQUITY 17,046,685 101,554 818,565 - 16,116,674
(213,000)
Non-current liabilities
Long-term borrowings 19,830,056 - - - - 19,830,056
Finance lease liabilities 10,412 - - - - 10,412
Derivative financial - - - - 213,000
instruments
213,000
Deferred tax liabilities 200,371 - - 1,911,668 - 2,112,039
20,040,839 - 213,000 1,911,668 - 22,165,507
Current liabilities
Trade and other payables 1,813,420 - - - - 1,813,420
Short-term borrowings 449,007 - - - - 449,007
Current tax payable 241,206 - - - - 241,206
Finance lease liabilities 4,164 - - - - 4,164
2,507,797 - - - - 2,507,797
TOTAL EQUITY and LIABILITIES 39,595,321 101,554 - 1,093,103 - 40,789,978
This information is provided by RNS
The company news service from the London Stock Exchange
END
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