5th Apr 2005 07:01
Crown Sports PLC05 April 2005 For Immediate Release 5 April 2005 Crown Sports PLC Preliminary Results for the Year Ended 31 December 2004 RETURN TO PROFITS AND DIVIDEND Crown Sports plc, the health and fitness club operator, today announcespreliminary results for the year ended 31 December 2004 and the payment of adividend for the year. "Our performance over the past year has seen a good uplift in profitability andfurther significant reductions in our debt levels, reflecting the success of ourstrategy of disposing of non core businesses whilst focusing on the health andfitness sector. The work undertaken by the management team has resulted in thesuccessful completion of our turnaround plan that has established a distinctiveplatform on which to build our business for the future." Ray Pierce, Chairman. RESULTS • Group turnover £22.9m (2003: £26.3m)• Group operating profit (pre exceptional items) up 40% to £4.2m (2003: £3.0m)• Pre tax profits £3.3m (2003: £2.0m loss)• Earnings per share 0.8p (2003: loss 0.8p)• Net debt down £5.3m (29%) to £12.7m (2003: £18.0m)• Gearing down to 25% (2003: 37%)• Net Assets per share 17.3p (2003 : 16.7p)• Final dividend proposed 0.27p (2003 : nil) OPERATIONAL HIGHLIGHTS • 10% growth in Dragons operating profit (excluding central costs) to £6.4m(2003: £5.8m)• 2.6% improvement in Dragons operating margin• Club membership up 3% on like for like basis to 51,237• Club joiners up 5% on like for like basis to 27,894• Transfer to AIM completed in May 2004• Capital reconstruction completed in June 2004 Commenting on the future, Martyn Grealey, Chief Executive of Crown Sports, said; "In the short term the market remains tough and highly competitive but we arecontinuing to make progress with net membership growth of over 3% in the firstquarter of 2005 which represents a significant achievement in challenging marketplaces." For further information please contact: Crown Sports plc On the day: +44 (0)20 7466 5000 Martyn Grealey - Chief Executive Thereafter: +44 (0)20 8662 4900 Chris Storr - Finance Director Buchanan Communications Tel: +44 (0)20 7466 5000 Mark Edwards James Strong CROWN SPORTS PLC Chairman's statement and Chief Executive's Review Year ended 31 December 2004 We are pleased to present the Group's results for the year ended 31 December2004. Our performance during this time has seen a good uplift in profitabilityand further significant reductions in our debt levels and reflects the successof our strategy of disposing of non core businesses whilst focusing on thehealth and fitness sector. Results Turnover for the year was down by 13% to £22.9m (2003: £26.3m) due primarily tothe sale of the Fitness Express and Leamington Spa operations with profit beforetax significantly increasing to £3.3m (2003: £2.0m loss). From our continuing operations we have seen a good performance with earningsbefore interest, tax, depreciation and amortisation (EBITDA) increasing by 11%to £6.3m (2003: £5.7m) before exceptional items. Operating profits for thecontinuing businesses increased by 12% to £3.7m (2003: £3.3m) whilst profitbefore tax and exceptional items increased significantly to £3.2m (2003: £1.0m) Exceptional costs of £0.5m have been incurred due primarily to the boardundertaking a strategic review of the business. Exceptional profits of £0.5mwere earned from the disposal of the Fitness Express and Leamington Spaoperations. Earnings per share before exceptional items grew by 0.5p, over 165%, to 0.8p(2003: 0.3p). As a result of the benefit of disposal proceeds and a good trading performance,net debt reduced by £5.2m to £12.7m with gearing falling to 25% (2003: 37 %). Club operations Dragons has a consistent proposition; all clubs have fitness and leisurefacilities, including pools, with a robust membership that is represented by acore of longstanding members whose support reflects the strong service ethicthat is inherent within the business. At 31 December 2004, on a like for like basis, our membership stood at 51,237members having grown during the year by 1,509 (3.0%). This reflects ourincreased investment in sales and marketing where we have made significantprogress during 2004. For the 21 clubs operated by Dragons throughout 2004, new joiners grew by 5%whilst the level of retention improved for the second consecutive year despite acontinuing tough market and the entrance of new competitors. This strongretention performance was due to the innovative Dragons Promise programme whichis now entering its third year and the increasing number of members who elect totake up a longer term membership. In the 12 months to December 2004, the numberof members on longer term agreements almost doubled, reflecting the quality ofthe Dragons club offering and the level of member commitment that it generates. Like for like turnover from the continuing business was marginally ahead despitethe loss of income due to further outsourcing of unprofitable none coreactivities whilst subscription and joining fees grew by 1%. In addition, we have undertaken several projects targeted at improving theutilisation of our floor space by increasing gym and leisure facilities thathave generated additional revenues. These initiatives have largely provedsuccessful and now form the template for future asset development projects. CROWN SPORTS PLC Chairman's Statement and Chief Executive's Review (continued) Year ended 31 December 2004 At the club level operating margins increased due in part to the identificationand implementation of further cost efficiencies whilst further head office costreductions have been achieved in 2004 as a result of running a more focusedbusiness. Many of these benefits relate to improvements made part way throughthe year and as a result further future benefits will be obtained in the comingyear. Property Unlike many other operators within the industry, the Dragons Health Clubs remaina significant and highly valuable tangible asset to the company with a highproportion of sites being freehold (10) and long leasehold (8) properties.During 2004 we undertook a number of refurbishment and improvement works to ourbuildings and equipment to ensure that the quality of these assets is maintainedand in many instances enhanced. Given the growth in recent years of leisureproperty values we believe that our strategy provides a valuable platform onwhich to build the future of the business. Dividend In recent years Crown Sports plc has been unable to pay a dividend. However,with the strong trading results for 2004 and following the successful courtapplication to restructure its capital in June 2004, the Board recommends adividend of 0.27p per ordinary share payable on 27 May 2005 to shareholders onthe register as at 29 April 2005, subject to approval at the AGM on 24 May 2005. Future Prospects Our management have a proven track record of driving improved performance inmature businesses and further efficiencies and income opportunities have beenidentified at club level. Moreover, further overhead savings will be deliveredthrough the relocation of our head office from Purley to Derby that will becompleted in April 2005 and for which exceptional costs of less than £100,000will be incurred. Also considerable marketing and administration benefits willbe achieved as a result of the implementation of a new membership system in May2005 that will replace the existing five separate systems that service thebusiness. During 2004 we have reviewed the value creation strategies for the business andbelieve that our core proposition offers an excellent platform for growth. Weare currently reviewing acquisition targets and we are actively exploringrelevant product development opportunities particularly in the areas of beautyand spa products where we believe there is excellent potential to further buildon our distinctive membership profile. Ray Pierce Martyn GrealeyChairman Chief Executive CROWN SPORTS PLCGroup Profit and Loss Account Year Ended 31 December 2004 Note Continuing Discontinued Total Continuing Discontinued Total Operations Operations Operations Operations 2004 2004 2004 2003 2003 2003 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 21,957 902 22,859 22,586 3,735 26,321 Cost of Sales (427) - (427) (462) (553) (1,015) Gross Profit 21,530 902 22,432 22,124 3,182 25,306 Administrative expenses (17,344) (872) (18,216) (18,651) (3,633) (22,284)Exceptional 2 (468) - (468) (147) (2,870) (3,017)administrative expensesTotal administrative (17,812) (872) (18,684) (18,798) (6,503) (25,301)expenses Operating profit / 4,186 30 4,216 3,473 (451) 3,022(loss) beforeexceptional items Exceptional 2 (468) - (468) (147) (2,870) (3,017)administrative expenses Total operating profit 3,718 30 3,748 3,326 (3,321) 5/ (loss) Net interest payable (992) - (992) (1,975) - (1,975)and similar chargesProfit on disposal of 7 - 7 - - -investmentsProfit on disposal of 481 - 481 - - -fixed assetsProfit / (Loss) on 2 - 47 47 - (11) (11)disposal ofdiscontinued operations Profit / (Loss) on 3,214 77 3,291 1,351 (3,332) (1,981)ordinary activitesbefore taxation Taxation on loss on (921) (273)ordinary activities Profit / (Loss) on 2,370 (2,254)ordinary activitiesafter taxation Dividend (785) - Retained profit / 1,585 (2,254)(loss) for thefinancial year Basic and diluted 3 0.8 (0.8)earnings / (loss) pershare (pence) Basic and diluted 3 0.8 0.3earnings per sharebefore exceptionalitems (pence) Dividend per share 0.27 -(pence) There are no gains or losses other than those reflected in the profit and lossaccount for the year. CROWN SPORTS PLC Group Balance Sheet as at 31 December 2004 2004 2003 £ 000 £ 000FIXED ASSETS Goodwill 3,553 3,847Negative goodwill (1,800) (1,839) 1,753 2,008 Total intangible assets 1,753 2,008Tangible assets 67,845 69,954Other investments - - Total fixed assets 69,598 71,962 CURRENT ASSETSStocks 203 147Debtors 1,241 1,930Cash at bank and in hand 1,214 - 2,658 2,077 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (6,650) (6,537) NET CURRENT (LIABILITIES) (3,992) (4,460) TOTAL ASSETS LESS CURRENT LIABILITIES 65,606 67,502 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (12,354) (15,873)PROVISIONS FOR LIABILITIES AND CHARGES (2,908) (2,870) NET ASSETS 50,344 48,759 CAPITAL AND RESERVESCalled up share capital 14,538 14,538Share premium account 27,010 59,826Capital redemption reserve 1,250 1,250Special non distributable reserve 7,395 -Profit and loss account 151 (26,855) EQUITY SHAREHOLDRS' FUNDS 50,344 48,759 These financial statements were approved by the Board of Directors on 4 April2005 and were signed on their behalf by: RF Pierce M Grealey CROWN SPORTS PLC Group Cash Flow Statement Year Ended 31 December 2004 2004 2003 £'000 £'000 NET CASH FLOW FROM OPERATING ACTIVITIES 5,162 5,045 RETURNS ON INVESTMENTS AND SERVICING OF FINANCENet interest paid (1,104) (1,254) NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (1,104) (1,254) TAXATIONCash outflow due to Corporation Tax - - CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTReceipts from sales of fixed asset investments 7 -Payments to acquire tangible fixed assets (942) (1,307)Receipts from sales of tangible fixed assets 1,408 50 NET CASH (OUTFLOW)/INFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL 473 (1,257)INVESTMENT ACQUISITIONS AND DISPOSALSCosts of acquiring subsidiary undertakings - (870)Net proceeds from disposal of discontinued operations 1,075 16,238Net cash balances leaving the group with disposal of discontinued (117) (371)operations NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 958 14,997 NET CASH INFLOW BEFORE FINANCING 5,489 17,531 FINANCINGNet cash outflow from repayment of bank loans (3,804) (17,928)Net cash outflow from reduction in finance leases (265) (279) NET CASH OUTFLOW FROM FINANCING (4,069) (18,207) INCREASE / (DECREASE) IN CASH 1,420 (676) 1.Operating results Following the disposal of a number of non-core businesses over the past twoyears, the operating results of the Group now predominantly arise from DragonsHealth Clubs, as illustrated in the table below : Dragons Fitness Express Total £m £m £m Turnover 22.0 0.9 22.9Cost of Sales (0.4) - (0.4)Admin Costs (15.2) (0.9) (16.1)Club Operating Profit 6.4 0.0 6.4 Club Operating Margin 29.1% - 27.9%Central Costs (2.2) - (2.2)Exceptional Costs (0.5) - (0.5) Total 3.7 0.0 3.7 2. Exceptional items 2004 2003 £'000 £'000 Impairment of goodwill and other intangible assets1 - 2,870Costs of restructuring continuing operations2 - 147Strategic review 468 -Exceptional operating costs 468 3,017Profit on disposal of Crown Golf - (426)Profit on disposal of The Winning Line - (64)Loss on disposal of Crown Content - 501Profit on disposal of Fitness Express (47) -Profit on disposal of shares (7) -Profit on disposal of Leamington Spa Club (481) -Exceptional non operating items (535) 11Total exceptional items3 (67) 3,028 1 A review of the goodwill and other intangible items arising on previous yearsacquisitions led to an impairment provision being made against Fitness Expressin the year to 31 December 2003 of £2,870k. 2 Restructuring Costs: In the year to 31 December 2003 the Company streamlinedcertain of its ancillary activities and re-positioned its management structurein order to focus on its core businesses. The cost includes termination paymentsmade to senior managers and associated fees arising from these terminations 3 The exceptional items have not had a significant impact on the tax charge for2004 (2003 : tax credit of £44,000). 3. Profit / (Loss) per share Basic and diluted profit / (loss) per ordinary share 2004 2003 Profit / (loss) per ordinary share (pence) 0.8 (0.8) Diluted profit / (loss) per ordinary share (pence) 0.8 (0.8) Earnings per share have been calculated on the net basis on the profit for theyear, of £2,370,000 (2003: £2,254,000 loss) using the weighted average number ofordinary shares in issue of 290,768,005 (2003: 290,768,005). Diluted earnings per share have been calculated using the weighted averagenumber of ordinary shares in issue, diluted for the effect of share options.The diluted weighted average number of ordinary shares is 290,768,005 (2003:290,768,005). Basic and diluted earnings per share before exceptional items and amountswritten off investments 2004 2003 Earnings per ordinary share (pence) 0.8 0.3 Diluted earnings per ordinary share (pence) 0.8 0.3 The profit for the year before exceptional items used in calculating the aboveearnings per share has been arrived at as follows: 2004 2003 £'000 £'000Profit / (Loss) for the year 2,370 (2,254)Add: exceptional items (per note 2) (67) 3,028Tax impact of exceptional items - (44)Profit for the year before exceptional items 2,303 730 4. Analysis of changes in net debt At 1 Jan Cash Disposal of Non-cash At 31 Dec discontinued 2004 flows businesses changes 2004 £'000 £'000 £'000 £'000 £'000 Net cash:Cash in hand and at bank (206) 1,420 - - 1,214 Debt:Bank loans (17,423) 3,804 - - (13,619)Finance leases (341) 265 65 (311) (322) Net debt (17,970) 5,489 65 (311) (12,727) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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