28th Sep 2005 07:02
Powerleague Group plc28 September 2005 28 September 2005 Powerleague Group plc Announcement of Preliminary Results For the Twelve Months Ended 2 July 2005 Powerleague is the leading commercial operator of 5-a-side football centres. TheGroup currently has 32 centres encompassing 335 floodlit, all-weather outdoorpitches. We are geographically spread throughout the UK and attract around80,000 players to our venues each week. • Sales up 14% to £17.5 million (2004: £15.3m) • EBITDA before exceptional items up 83% to £5.97 million (2004: £3.27 million) • Operating profit before exceptional items up 129% to £4.2 million (2004: £1.8m) • Cash generated of £5.25 million, up from £4.1 million • Sponsorship and events revenues up by 74% • Headline sponsorship with Xbox extended for a further three years • 5 centres added in the year and two more since the year end • New national sponsorship agreement reached with Nike in Sept 2005 Commenting on the results, Claude Littner, Chairman of Powerleague, said: "The excellent results achieved over the last 12 months have once againdemonstrated the underlying strength of our business, as by and large, thesignificant increases in sales, profit and cash generated have been achievedfrom the existing estate. Looking forward, the Company is very well positioned to grow both organicallyand through the development of new 5-a-side centres. The new financial year hasstarted well, and I believe that we can further develop a number of lucrativerevenue streams whilst maintaining the focus on pitch income which is the primedriver of this business. 2006 is a 'World Cup' year which will draw even greaterattention to the sport. I am confident that the 5-a-side market will continue toincrease in popularity as more players, both men and women, become involved andenjoy the experience". Enquiries: Powerleague Group plc 020 7930 0777 on 28/09/05Claude Littner, Executive Chairman (thereafter 0141 887 7758)Sean Tracey, Chief Executive Cardew Group 020 7930 0777Tim RobertsonEmma Consett Chairman's Statement It is with great pleasure that I announce our maiden annual results followingthe company's successful admission to the Alternative Investment Market in May2005. ResultsFor the year ended 2 July 2005 the Group delivered another strong tradingperformance with turnover increasing by 14% to £17.5 million. EBITDA beforeexceptional items increased by 83% to £5.97 million and operating profit beforeexceptional items was up by 129% at £4.2 million. Cash generated from operatingactivities increased from £4.1 million to £5.25 million. It is the Board's intention to pay dividends in the future, but we have notdeclared a dividend for this year, and will use the surplus funds to further paydown bank debt and grow the business. Structure & SystemsWe have a management structure and robust systems in place designed to manageand control the existing business as well as provide the platform for futuregrowth. Indeed, we have shown strong organic growth over a number of years nowand expect to continue this trend and couple it with the addition of newcentres. Our proprietary systems and management controls give 'real time' visibility overeach of our centres, and enable us to capture information, forward plan andproactively manage the business. The systems are highly scaleable, and themanagement information is accurate and produced in timely fashion, thusproviding the directors with the ability to respond very rapidly. EmployeesOur employees have embraced the open culture, understand their role, work inharmony and strive towards achieving or exceeding objectives. In 2003, thedirectors put in place an Employee Share Option Scheme which enabled a greatnumber of our employees to participate in the success of the Company. Ourprogressive employee development programme and bonus structure has enabled us toretain and motivate our key employees, and they in turn have helped us shape thebusiness and permeate new ideas and techniques throughout the Company. I am grateful to all our employees for their dedication, hard work and loyaltyover many years. It is their focus and attention to detail in the front line ofthe business that has enabled us to report such good progress this year. Leading PositionAs the leading commercial operator of 5-a-side football centres and with5-a-side football in the UK now attracting more players than the 11-a-side gamewe are well placed to take advantage of this strong trend. With over 80,000 players, predominantly young males between the ages of 18-35years, participating in grass roots football at Powerleague centres across theUK each week, we already attract considerable interest from blue chip sponsors,and have significant scope to develop this further. Earlier this year, weextended our successful partnership with Microsoft's Xbox our headline sponsorsfor a further three years. More recently, we have signed a new sponsorshipagreement with Nike. These agreements are not only accretive, but also furtherstrengthen the Powerleague brand and underline our dominant position in 5-a-sidefootball. During the financial year, five centres were added to the Estate, of which 4were former VIDA sites which we acquired from the Administrators at the end ofMay 2005. A further 2 new centres have opened since the year-end bringing thetotal number to 32. As a commercial enterprise, 5-a-side football is still arelatively new industry and there is significant scope for Powerleague todevelop new sites within the UK. Site selection is a key element, and we haveconsiderable expertise in this area and use a combination of experience andprocess to ensure that the sites meet our criteria, are delivered on time and onbudget, and the ramp up is quick and sustainable. Flexible ApproachWe have developed a flexible approach to both site location and build, and arejust as happy to develop sites in major conurbations as we are in moreprovincial locations. Our modular approach is perfectly adapted to bothpropositions, and we seek to develop additional pitches at centres in line withdemand. Each new centre uses the latest generation pitch playing surface, aswell as providing secure car parking, a friendly well equipped club house andbar. At this time, we have a strong pipeline of potential sites at varying stages inthe process of negotiation and planning. Some may come to fruition rapidly andothers may fall away or get delayed in the planning process. We remainconfident, however, that we will accelerate the roll-out programme. Three siteswill open in the year to June 2006 and the Group remains on target to open afurther four in the following year. OutlookLooking forward the Company is very well positioned to grow both organically andthrough the development of new 5-a-side centres. The new financial year hasstarted well, and I believe that we can further develop a number of lucrativerevenue streams whilst maintaining the focus on pitch income which is the primedriver of this business. 2006 is a 'World Cup' year which will draw even greaterattention to the sport. I am confident that the 5-a-side market will continue toincrease in popularity as more players, both men and women, become involved andenjoy the experience. Claude LittnerExecutive Chairman Operating and Financial Review IntroductionI am pleased to report that the 12 months to June 2005 has been a period ofstrong growth across the Estate. Our new centre at Watford opened in February2005 and is proving to be a great commercial success. The acquisition of 4former VIDA sites in May 2005 is providing the impetus for further growth and avaluable addition to our portfolio. The progression of the Group's pipeline ofsites has also taken on a greater focus as the company accelerates its rolloutprogram, in a measured and structured manner. We are the market leaders in a growth sector of the leisure industry, which hasfew serious competitors. With an opportunity to roll out our proven 5 a-sideformula across the UK, the next phase of the Group's development offersconsiderable scope to grow the business. In addition, we are consistentlyimproving sales in our existing facilities, as evidenced by the 6% increase inlike for like sales, as well as creating new income streams from partnershipswith sponsors such as Xbox and Nike. Financial ResultsStrong sales growth has been achieved through focused marketing initiativesdriven at local and Head Office level. Group turnover grew by 14% to £17.5million (2004: £15.3 million) and operating profit before exceptional itemsincreased to £4.2 million (2004: £1.8 million) a rise of 129%. Exceptional items of £0.93 million related to a credit arising from the reversalof impairment of fixed assets of £1.28 million offset in part by a bonus payableto members of the former Employee Benefit Trust Scheme of £0.35 million.Exceptional credit of £2.2m in 2004 related to the reversal of impairment offixed assets. Adjusted pre-tax profit was £2.2 million against £0.3 million inthe previous year. Improved EBITDA performance has been achieved through sales growth - pitchutilisation at peak times has reached over 80% across the group - and strictcost management, particularly in relation to staff costs, the single biggestoverhead, where the like for like staff costs to turnover ratio has steadilyreduced from 23% in 2003 to 21% in 2005. Our operational gearing is expected tocontinue to improve as turnover increases, reflecting the relatively fixednature of our base operating costs. During the year, the Directors reviewed the useful lives of pitch surfacesacross the Estate. All pitch surfaces are now depreciated over the lesser of 10years or their estimated remaining useful economic life. This reassessmentresulted in an additional charge of £52,000 in the year over the policypreviously adopted. It is estimated that the impact on the depreciation chargefor the coming year will be an additional £150,000. Basic and diluted earnings per share for the year was 2.80p compared with 3.28pfor the previous year. The reduction is due to the deferred taxation charge in2005. Adjusted EPS, based on profit before taxation and extraordinary itemsimproved from 0.22p to 2.97p. Net cash flow from operating activities, improved by 29.7% in the year from£4.1m to £5.2m. The reason for the overall reduction in cash flow wasexpenditure on fixed assets and acquisitions, which. expanded the Group'soperation from 25 to 30 sites, with one new build and the acquisition of fourtrading sites from VIDA. The resulting net outflow of cash was offset by anincrease in funds arising from financing with the share issue on flotation inMay 2005 and reduction in net debt from £24.1 million to £16.7 million. VIDA acquisitionA conditional business sale and purchase agreement was signed on 20 May 2005between Powerleague Fives Ltd and VIDA Limited and Small Sided Soccer Ltd (bothin administration) ("VIDA") pursuant to which Powerleague Fives Ltd agreed toacquire the business of four 5 a-side football centres from VIDA for a totalconsideration of £3.75 million in cash. The centres are in Manchester,Warrington, Barnsley and Dunfermline. The final assignment was completed on 27July 2005. Trading from 20 May 2005 has been included in the results for theyear, with turnover of £205,000 and EBITDA of £24,000. Since acquisition, these centres have received close attention in order toensure that from a management and systems perspective, they can quickly attaintheir potential under the Powerleague brand. The former VIDA centre in SouthManchester is worthy of special note, as it benefits from a well attended andfully equipped gym. The gym is being extended as we regard this as a potentiallylucrative development opportunity. Site DevelopmentIn February 2005 Powerleague opened its first modular build construction atQueens School Watford. The centre opened with 8 five a-side pitches and one 7a-side pitch. As a result of an intensive pre-opening marketing campaign, 150league teams were signed up to play prior to opening. The centre was EBITDApositive within the first full month of trading and has continued to flourish.Powerleague has pioneered this modular approach to pavilion construction whichreduces construction costs and guarantees faster build times. From thecustomer's perspective, all the comforts, high quality finishes and visualappeal are preserved. The Group's flexible approach to site development enablesus to adapt our offering to suit a multitude of situations and enhance ourreturn on investment. This flexible approach and diversity can best be illustrated by outlining theprogramme for our next three centres. Basingstoke, which will open in October 2005, is on a school site and replicatesthe successful Watford modular model. Kilmarnock, which will also open inOctober 2005, is a stand-alone site, with the pavilion built of standardconstruction to our specification and acquired from a private developer. Our newCoventry centre, which is scheduled to open in May 2006, is a traditional, steelframe construction on a school site, which will form part of a major leisureproject involving the creation of a regional gymnastics centre funded byCoventry City Council and The New Opportunities Fund. Powerleague will have 10pitches, a licensed bar and an "affordable" gym facility, in addition tocontrolling all wet and dry sales for the whole development. Furthermore, we are creating additional pitches at existing centres at Fairlop,Barnet, and Watford, where demand exceeds supply and we have a "land-bank".These pitches will open in October 2005. We have an on-going refurbishment programme and, where commercially justified,or where the pitches have come to the end of their useful life, we will investin latest technology pitches. In August 2004, full 3rd generation surface pitchrefurbishment was carried out at Powerleague Manchester's 14 pitches. By the endof June 2005, sales were up by 13% on prior year. Powerleague Croydon and Sheffield have also been fully refurbishment in thirdgeneration pitches in August 2005. Corporate EventsOver and above numerous local events, Powerleague managed 14 national corporateevents for various companies such as Sainsbury, Barclays, JD Wetherspoon,Securicor and Honda. We manage the process from start to finish and tailor eachevent to suit the client and meet their specific objectives. We see furthergrowth opportunities and enjoy a high level of repeat business. SponsorshipPowerleague has been cultivating opportunities for Sponsorship from consumerfacing companies with brands and products which are sought after by ourcustomers. We have worked closely with Xbox, Microsoft's powerful game console product, forthe last two years and they have recently extended their headline sponsorship onenhanced terms for a further three years. In 2004, Nike involved Powerleague in the launch of its new footwear product,Air Zoom Control, designed for 5 a-side football. The success of this event hashelped build further ties with the world's leading sports brand. Powerleague hasnow secured a National Sponsorship agreement, initially for 2005 and 2006. We are engaging with a number of other potential sponsors who see thesignificant benefits that can be gained from partnering with Powerleague and wein turn derive both financial and commercial benefits from links with suchprestigious companies. OutlookWith a strong and highly profitable core business, a high level of recurringrevenue, and excellent pipeline of future sites to develop, and encouraginggrowth being shown from Sponsorship and National Events, the outlook for thefuture looks bright. The success achieved from our activities in the last yearand a good start to the current year give us confidence for the year ahead. Sean Tracey, Chief Executive Group Profit and Loss AccountFor the year ended 2 July 2005 Year Year ended ended 2 July 26 June 2005 2004 Notes £000 £000 Turnover 17,477 15,295Cost of sales (3,212) (2,631) ----------- -----------Gross profit 14,265 12,664 ----------- ----------- Administration (10,052) (10,827)expensesExceptional 2 928 2,243items ----------- -----------Total 9,124 (8,584)administrationexpenses ----------- -----------Operating 5,141 4,080profit Analysed as:Operating profit 4,213 1,837excludingexceptional itemsExceptional 928 2,243items Cost of group (189) -reconstruction Loss on (285) (125)disposal offixed assets Net interest (1,575) (1,403)payable andsimilar charges ----------- -----------Profit on 3,092 2,552ordinaryactivitiesbefore taxationTax on profit 3 (660) 264on ordinaryactivities ----------- -----------Profit on 2,432 2,816ordinaryactivitiesafter taxationDividendsPreference (145) (128)dividend onnon-equityshares ----------- -----------Retained profit 2,287 2,688for the year ----------- ----------- ----------- -----------Earnings per ordinary share- basic and diluted 4 2.80p 3.28pAdjusted Earnings per ordinary share 4 2.47p 0.22p Group Balance SheetAt 2 July 2005 As at As at 2 July 26 June 2005 2004 Notes £000 £000Fixed assetsTangible assets 61,500 42,964Goodwill 5 (2,110) - ----------- ----------- 59,390 42,964Current assetsStocks 115 101Debtors 944 620Cash at bank 25 663and in hand ----------- ----------- 1,084 1,384 Creditors: (6,291) (6,714)amounts falling due within one year ----------- -----------Net current (5,207) (5,330)liabilities ----------- -----------Total assets 54,183 37,634less currentliabilities Creditors:amounts falling (13,774) (21,708)due after morethan one year Provisions for (1,816) (871)liabilities andcharges ----------- -----------Net assets 38,593 15,055 ----------- ----------- ----------- ----------- Capital and reservesCalled up share 8,182 5,026capitalShare premium 7,287 -accountGroup Merger - 23,396ReserveRevaluation 3,961 15,099reserveCapital reserve 15,931 -Profit and loss 3,232 (28,466)account ----------- -----------Shareholders' fundsEquity 38,593 -Non-equity - 15,055 ----------- ----------- ----------- ----------- Group Statement of Cash FlowsFor the year ended 2 July 2005 Year Year Ended ended 2 July 26 June 2005 2004 £000 £000 Net cash inflow from 5,252 4,091operating activities Return on investments andservicing of financeInterest paid (1,591) (1,402)Issue costs of borrowings (69) -Cost of non-equity share issue - (115)and buy-backNon Equity Dividend (273) - ----------- ----------- (1,933) (1,517) ----------- ----------- Capital expenditurePayments to acquire (2,727) (1,899)tangible fixed assetsProceeds from the disposal of tangible fixed assets 12 - ----------- ----------- (2,715) (1,899) ----------- -----------Acquisitions and disposals ----------- -----------Payment to acquire four sites (4,045) (1,899)from VIDA ----------- ----------- Cash (outflow)/inflow (3,441) 675before financing FinancingNew shares issued 11,427 2,601Shares repurchased (26) (2,600)Cost of equity share issue (958) -Proceeds of Employee Benefit 352 -Trust Shares SaleNew borrowings 17,344 622Repayment of borrowings (26,115) (852) ----------- ----------- 2,024 (229) ----------- -----------(Decrease)/increase in cash (1,417) 446 ----------- ----------- ----------- ----------- Reconciliation of net cash flow to movement in net debt £000 £000 (Decrease)/increase in cash in the period (1,417) 446Net cash outflow from decrease in debt 8,840 229 -------- --------Movement in net debt 7,423 675Opening net debt (24,108) (24,783) -------- --------Closing net debt (16,685) (24,108) -------- -------- -------- -------- Notes to the preliminary results for the year ended 2 July 2005 1. Basis of preparation The financial information set out herein relating to the Company for the yearended 2 July 2005 and the year ended 26 June 2004 does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. The financial information incorporates the results of the Company and all of itssubsidiaries and has been prepared using merger accounting principles,presenting the results of the Group as if Powerleague Group plc had been inexistence and had owned Powerleague Fives Ltd and its subsidiaries for the wholeperiod under review. 2. Exceptional items Year Year ended ended 2 July 26 June 2005 2004 £000 £000 Impairment of fixed assets - 732 Reversal of previous impairment (1,280) (2,975)of tangible fixed assetsBonus payable to Employee Benefit 352 -Trust scheme participants -------- -------- (928) (2,243) -------- -------- -------- -------- The reversal of previous impairment of fixed assets of £1,280,000 (2004 -£2,975,000) relates to an original impairment that was recognised in the profitand loss account in the year ended 30 June 2001 and has arisen as a result of animprovement in trading performance and in the expected cash flows arising fromthe operation of these facilities. 3. Taxation on profit on ordinary activities Year Year ended ended 2 July 26 June 2005 2004 £000 £000 Current taxation:UK Corporation tax - -Adjustment in respect (285) (223)of prior years ----------- -----------Total current tax (285) (223) Deferred taxation:Charge/ (Credit) for 945 (41)the current period ----------- -----------Taxation on profit on 660 (264)ordinary activities ----------- ----------- ----------- ----------- Factors affecting the current tax charge:The tax assessed for the periods differs from the standard rate of corporationtax in the UK. The differences are explained below: Year Year ended ended 2 July 26 June 2005 2004 £000 £000 Profit on ordinary 3,092 2,552activities before tax ----------- -----------Tax on profit on ordinary 927 766activities before tax at 30%Expenses/(Income) not deductible/(allowable) for 121 (391)tax purposesCapital allowances in (448) (409)excess of depreciationUtilisation of tax losses - 34Unrelieved tax losses (601) -brought forwardAdjustments to tax charge in respect of prior period (285) (223) Other timing differences 1 - ----------- -----------Total current tax (285) (223) ----------- ----------- ----------- ----------- Factors that may affect future tax charges A deferred tax asset has not been recognised in respect of timing differencesrelating to trading losses and non trading deficits, provisions and fixed assettiming differences as there is insufficient evidence that the asset will berecovered. The amount of the asset not recognised is £651,000 (2004 - £734,000).The asset would be recovered if appropriate future taxable profits are made.As the independent valuation of the properties exceeded their tax written downvalues, capital allowances in respect of these assets will be lower than therelated depreciation until the properties are fully depreciated. 4. Earnings per share Basic and diluted earnings per ordinary 10p share is calculated by dividing theearnings attributable to ordinary shareholders by the weighted average number ofordinary shares in issue during the period. Weighted Weighted Profit Average average for number 2005 Profit number 2004 the of shares earnings for the of shares earnings year number per share year number per share £000 (000) p £000 (000) p Basic and dilutedearnings per share 2,287 81,820 2.80 2,688 81,820 3.28 Adjusted earnings per ordinary 10p share is calculated by dividing OperatingProfit before extraordinary items, but after deducting dividends payable onpreference shares. Weighted Weighted Profit Average average for number 2005 Profit number 2004 the of shares earnings for the of shares earnings year number per share year number per share £000 (000) p £000 (000) p Adjusted earningsper share 2,019 81,820 2.47 181 81,820 0.22 Reconciliation of profit for the year: 2005 2004 £000 £000 Profit for basic and diluted earnings per share 2,287 2,688Exceptional items (928) (2,243)Taxation 660 (264) ----------- ----------- Profit for adjusted earnings per share 2,019 181 ----------- ----------- For this first reporting year, the shares in issue at flotation have beentreated as if they had been in issue for the whole of the two reporting periodsunder consideration. 5. Goodwill Negative goodwill arose in the period following the acquisition of four sitesfrom VIDA and after the application of fair values applied to the assets andliabilities acquired. Fair value table Adjustments Book value Revaluation Other Total £000 £000 £000 £000 Fixed assets 4,101 2,159 a) 25 b) 6,285Stock 20 - - 20Cash 2 - - 2Prepayments 2 - - 2Creditors due within less than one year - - (25) b) (25)Creditors due after more than one year (78) - - (78) --------- --------- --------- ---------Net assets 4,047 2,159 - 6,206 --------- --------- --------- --------- Negative goodwill (2,159)arising --------- 4,047 ---------Discharged by:Purchase price 3,775 Costs associatedwith the 272acquisition --------- 4,047 a) increase in value of long leasehold properties to reflect third party valuation (see note 11) b) recognition of asset and liability in connection with assets acquired but not yet paid for Negative goodwill £000 At 26 June 2004 -Arising on acquisition of assets 2,159Released to the profit and loss (49)account in the period -----------At 2 July 2005 2,110 ----------- ----------- 6. Annual report and accounts The annual report and accounts for the year ended 2 July 2005 will be posted toShareholders in October 2005. Additional copies will be available via theCompany's website, www.powerleagueplc.com, or from the Company Secretary at thecompany's Head Office at Anchor Grounds, Blackhall St, Paisley, PA1 1TD. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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