25th Jan 2010 07:48
25 January 2010
All Leisure group plc
Announcement of Results
Highlights
Profits before derivatives modestly ahead of expectations at £4.5m (2008: £6.3m).
Successful integration of the Hebridean Princess.
Final dividend of 1.22p per share (2007/08: 1.22p).
Group remains strongly cash positive. Year end cash (including restricted cash) £31.2m (2008: £33.0m).
Acquisition of mv Alexander von Humboldt since year end.
|
Audited |
||
|
Year ended October 2009 £'000 |
Year ended October 2008 £'000 |
|
|
Turnover |
73,594 |
67,512 |
|
Operating Profit |
2,577 |
7,599 |
|
Profit before taxation |
2,642 |
9,052 |
|
Profits before tax and certain derivative-related items (see FD report) |
4,494 |
6,275 |
|
Profit for the financial year |
2,707 |
8,814 |
|
Earnings per share - basic and diluted |
4.4p |
14.4p |
|
Dividend per share |
1.82p |
3.66p |
|
Total Equity |
31,235 |
30,358 |
This announcement of All Leisure group plc ("All Leisure", "the Group", "the Company") is based on audited results and contains some forward-looking information and statements that involve known and unknown risks and uncertainties, including statements about the Group's plans, objectives and intentions. The information and statements contained herein are stated by the Directors in good faith as at the date of this report and there exists the risk that actual results and outcomes may differ from the information and statements made.
A presentation will be given to analysts at 9:30am today, Monday 25 January 2010, at the offices of Citigate Dewe Rogerson (3 London Wall Buildings, London Wall, London EC2M 5SY).
For further information:
|
All Leisure group plc Roger Allard Rob Bryant Guy Marchant Ross Jobber |
01444 462 111 Chairman Chief Executive Officer Group Finance Director Group Chief Operating Officer |
|
Financial Public Relations Citigate Dewe Rogerson Ginny Pulbrook/Lindsay Noton |
020 7638 9571 |
|
Broker and Nominated Adviser Panmure Gordon Andrew Godber / Callum Stewart |
020 7459 3600 |
Chairman's Statement
Profitability for all operators has been compromised not only by the recession, but also by factors such as adverse movements in currency and fuel costs, and All Leisure group has not been immune from these. Whilst significant, these factors were not entirely unexpected, and the steps taken by the board to mitigate the worst of their effects mean that I am pleased to report a group profit before tax and certain derivative adjustments modestly ahead of city expectations at £4.5m (2007/08: £6.3m). This result was also helped by various non-recurring items which made a net profit contribution. Further details are contained in the Finance Director's report.
These profits together with a proposed final dividend payment of 1.22p per share (full year 1.82p) should be encouraging news for our shareholders. The board is particularly pleased to have maintained dividend payments throughout its life as a listed company. As promised, the Group was able to take advantage of the prevailing market conditions and consolidate its position in the destination-led cruise segment following the acquisition of the Hebridean Princess in April 2009. This acquisition fits our strategy extremely well given the nature of the product and the complementary customer profile and underpins our position as the largest UK-owned cruise operator. Since the year end the Group has expanded further with the announcement on 16 November 2009 of the acquisition of the mv Alexander von Humboldt. Following technical work this winter, the ship will be chartered to Phoenix Reisen GmbH between May and October 2010. These acquisitions meet key medium term board objective, namely to invest the £8.9 million (net) raised at the time of our Initial Public Offering in October 2007. Despite investing in these two new vessels, the Group's balance sheet remains net cash-positive and the final instalment on our only debt outstanding (related to the purchase of the mv Discovery in May 2005) is scheduled to be repaid in May 2010.
Results
Turnover during the year increased by 9% to £73.6m (2008: £67.5m). This was partially due to a full year of cruising from Swan Hellenic, the contribution of mv Hebridean Princess and an uninterrupted programme for mv Discovery. However, profit for the financial year decreased by 69% to £2.7m (2008: £8.8m). Pre-tax profits were £2.6m (2008: £9.1m) and pre-tax profits before certain derivative adjustments fell by 28% to £4.5m (2008: £6.3m). A proposed final dividend of 1.22p per share will, if approved, result in a total payment for the year of 1.82p per share (2008: 3.66p). Including advanced customer receipts of £13.7m (2008: £13.5m), the Group ended the financial year with bank deposits and cash balances of £31.2m (including restricted cash of £2.9m) (2008: £33.0m; restricted cash £3.1m).
Strategy
The Group's strategy remains unchanged, namely to achieve growth by exploiting the growing demand for destination-led cruise holidays and by providing an increasing choice of other niche holiday products into the over-55 English speaking market.
The Directors believe that the Group's chosen niche markets have a number of fundamental attractions:
Significant barriers to entry. The Directors believe that a growing focus by regulators on safety and consumer protection is raising the barriers to entry for those wishing to enter the Group's markets. This is benefiting established brands with strong balance sheets.
High levels of repeat business. The Group has again enjoyed significant repeat passenger business during the year, underlining the benefits of customer loyalty.
Strong revenue visibility. Despite a trend towards later booking in recent months, the Group enjoys significant forward visibility on its cruise bookings compared with other package holiday products. Cruises go on sale more than twelve months prior to departure and are generally 50% sold six months before sailing.
An attractive tax regime. From February 2007 mv Discovery qualified for the tonnage tax regime, followed by mv Minerva in May 2008 and Hebridean Princess on acquisition in April 2009. As a result, the Directors expect the Group tax rate to be lower than the current level of UK corporation tax for the foreseeable future.
In addition, the Group has other considerable strengths:
Well established brands. Swan Hellenic was established in 1954, Hebridean Island Cruises in 1988, Voyages of Discovery was established in 1994 and Discover Egypt in 1999. By virtue of their history, we believe that all four brands represent trusted names, generating significant customer loyalty in their niche markets, both in the UK and overseas.
Operational excellence. On-board surveys of ocean cruise passenger attitudes reveal that nine out of ten of last year's passengers surveyed intend to cruise with the Group in the future.
A committed and experienced management team. The board and two other senior executives together own 76.7 per cent of the shares in issue. The management team brings a wide range of complementary experience from both inside and outside the travel industry.
Strong asset backing. The Group own the ships mv Discovery, mv Hebridean Princess and mv Alexander von Humboldt. The outstanding debt associated with the purchase of mv Discovery is scheduled to be repaid by May 2010, leaving the Group debt free.
Significant balance sheet liquidity. Including advanced customer receipts the Group ended the financial year with unrestricted cash (including advanced customer receipts) of £28.2m (2009: £29.9m). Despite subsequent asset purchases (mv Alexander von Humboldt) and significant scheduled dry-dock work for both the mv Discovery and mv Hebridean Princess, the board still expects the Group to finish the current financial year ending 31 October 2010 in a net cash position.
Hedging
The majority of the Group's currency requirements for the financial year 2008/09 were covered by currency hedges and in addition the Group has hedges in place to cover the majority of its requirements for the year ahead. Given that the Group does not employ hedge accounting, the mark-to-market profits/losses for any hedges still outstanding at 31 October 2009 appear in the consolidated income statement for the year. In May and September 2008 the Group entered into fuel swaps expected to correlate with future movements in marine fuel prices. The value of the swaps entered into represented approximately 50% of the Group's anticipated calendar 2009 fuel requirements. The Group has subsequently taken out fuel swaps to cover 50% of anticipated exposure up to December 2010.
Dividend policy
2008/09 final dividend
Although the board anticipated not paying a FY08/09 interim dividend, more stable market conditions in the first half of the year allowed the payment of an interim dividend of 0.6p per share (FY 07/08: 2.44p). The board believes that until a marked recovery is seen in the market, it is prudent to base future dividend payments off the level of the current year's dividend. It is therefore proposing that the FY 08/09 interim dividend represent approximately one-third of the full year payout. For this reason the board feels that it is appropriate to pay a 1.22p final dividend per share (07/08: 1.22p) resulting in a full year FY 08/09 dividend of 1.82p per share (FY07/08: 3.66p).
Current year dividends
With market conditions now stable (albeit at depressed levels) the Board does not anticipate any further disruption to its progressive dividend policy stated at the time of the Group's admission to AIM in October 2007. The Directors reiterate that they intend to continue a policy which, subject to satisfactory trading and having regard to prevailing circumstances and opportunities, will provide for the distribution of a proportion of the consolidated profit after tax of the Group, whilst continuing to retain the balance of the Group's earnings to facilitate the Board's strategy for the continued growth of the Group.
Outlook
Trading is still challenging across our industry and whilst UK consumer confidence is slowly recovering, the continued weakness of Sterling puts pressures on costs and therefore margins that are difficult to mitigate. Our previously announced time charter arrangements on Minerva (Spring 2010) and Alexander von Humbolt (Summer 2010) have allowed us to increase our non-sterling revenues for the current financial year and we continue to pursue active hedging strategies for both our fuel and currency costs. The March to November trading profile of Hebridean Princess and the initial investment required on the Alexander von Humboldt increases the likelihood that the Group will report winter losses (compensated by greater summer profits) in future financial years. The board continues to look for further investment opportunities that current market conditions might reveal, however it remains confident that the recent investments will underpin the Group in the short term.
R J Allard, Chairman
Chief Executive's Report
(i) Cruising
The following table provides the current and historical figures for the principal operating KPIs employed by the cruising sector, including the gross fuel spend:
|
|
FY 2009 |
FY 2008 |
|
|
|
|
|
Revenue passenger days - (winter) (i) |
108,180 |
78,205 |
|
Revenue passenger days - (summer) (i) |
171,083 |
147,310 |
|
|
|
|
|
Non revenue days - Discovery |
0 |
11 |
|
Non revenue days - Minerva |
9 |
11 |
|
Non revenue days - Hebridean Princess |
0 |
n/a |
|
|
|
|
|
|
|
|
|
Ships - owned (ii) |
2 |
1 |
|
Ships - leased |
1 |
1 |
|
|
|
|
|
Discovery fuel spend ($'000) (iii) |
8,175 |
8,819 |
|
Minerva fuel spend ($'000) (iii) |
7,091 |
7,583 |
|
Hebridean Princess fuel spend (£'000) (iii) |
190 |
n/a |
|
|
|
|
Notes:
(i) Calculated as the total passengers carried multiplied by the total number of revenue sailing days. The first mv Minerva contribution is Summer FY 2008 and the first mv Hebridean Princess contribution is Winter FY 2009. The calculation also counts passengers separately on each leg of their itinerary.
(ii) On 17 November 2009 the Group announced the purchase of the mv Alexander von Humboldt from the Admiralty Marshal, taking the number of vessels owned by the Group to three.
(iii) Individual purchases are allocated to a financial year based on date of purchase only. Purchase prices exclude any impact of fuel hedging.
Voyages of Discovery
Voyages of Discovery offers niche year-round destination-led cruises on board the mv Discovery which appeal to mature customers and include a wide variety of itineraries worldwide.
During the winter 2008/09 season mv Discovery (20,216 gross tons, 356 cabins and offers a maximum of 708 lower berths) carried 5,395 passengers (2007/08: 5,717). During the summer 2009 season, mv Discovery carried 9,929 revenue passengers (2008: 9,416).
Sales are generated through a number of sources. Cruises sold in the UK are generally sold directly to the public or on the Group's behalf by specific travel agents with an expertise in the cruise market. The direct sales to the public are either to repeat customers of the Group or generated through passenger referrals, advertising and other promotions. In the US and Canada cruises are sold via the Group's Fort Lauderdale sales office and across the rest of the English speaking world, via the Group's arrangements with general sales agents in South Africa, Australia, and New Zealand.
In line with our strategy of offering our customers the widest possible choice, we are introducing a new Central and South American itinerary for Winter 2010/11.
The ship recently completed a major dry dock in Barcelona which took place in November 2009.
Swan Hellenic
In July 2007 the Group acquired the Swan Hellenic brand and other associated assets, with several senior members of Swan Hellenic's management team joined the existing management team. Mv Minerva weighs 12,449 tons gross and has 197 cabins offering a maximum of 394 lower berths
Following a successful winter season for mv Minerva in Antarctica, including returning to Europe via the East coast of Africa, the vessel operated a programme of summer cruises operating out of Dover to Northern Europe and the Mediterranean. During the summer 2009 season mv Minerva carried 3,755 passengers (2008: 3,314). During Winter 2008/09 Minerva carried 2,370 passengers.
The success of the re-launched Swan Hellenic summer cruise programme in 2008 meant that comparatives were always going to be demanding, but despite this the summer 2009 booking levels were pleasing and paid testament to the strength of support for the programme, especially amongst previous passengers. As well as re-introducing popular summer itineraries, passengers were once again offered a winter 2008/09 programme that gave the best possible access to the Antarctic continent. By way of contrast, we are introducing a number of exciting new destinations in Asia for Winter 2010/11. The ship next enters dry dock in 2011.
On 8 July 2009 the Group announced that it had entered into a whole ship charter agreement with Phoenix Reisen GmbH, a German cruise operator for the return leg of the mv Minerva's Winter 2009/2010 programme from South America to Europe. As a result Swan Hellenic has been able to offer two new exciting Spring 2010 cruises on board Minerva; from Cadiz to Piraeus (7 April to 19 April) and Piraeus to Aqaba (19 April to 1 May).
Our summer 2009 Swans river cruise programme on the Danube and the Rhone was successful and will continue in summer 2010 with the addition of cruises on the Rhine.
Hebridean Island Cruises
In April 2009 the Group acquired the mv Hebridean Princess, the trade and certain associated assets from the administrator of Hebridean International Cruises Limited. A number of staff also joined the Group operating from an office in Skipton, North Yorkshire. The Hebridean Princess is a five star vessel weighing 2,112 gross tons and has 30 cabins offering a maximum of 49 lower berths. The ship operates principally from Oban between March and November and offers a range of cruises around the Scottish islands. Between 23 April 2009 and 31 October 2009 the Hebridean Princess carried 1,176 passengers.
At the time of its acquisition it should be noted that future 2009 revenues totaling £4.5m had been paid to the previous owner of the vessel. Approximately £1m of this revenue has been recovered and the Group is pursuing further recompense from the former operator's insurers for the majority of the remaining amount. As a result of this revenue gap, Hebridean Island Cruises reported a loss before certain items (specifically the excess of acquirer's interest in the net fair value of assets over the cost of acquisition) of £2.2m for the financial year. This was in line with The Group's expectations at the time of the acquisition.
mv Alexander Von Humboldt
On 16 November 2009 the board announced that it had successfully tendered in an auction, conducted by the Admiralty Marshal, for the mv "Alexander von Humboldt". This vessel, which has a gross tonnage of 15,271 tonnes, came into service in 1990 and has up to 500 lower berths. The vessel has 250 passenger cabins, 90% of which are outside cabins. The Group intends to undertake an extensive technical upgrade programme on the ship, bringing the total investment in the vessel to approximately US $20 million. This will be met from the Group's existing cash resources. A further announcement on 17 December 2009 stated that the Group had subsequently entered into an agreement with Phoenix Reisen GmbH to charter the vessel between May and October 2010.
Cruising Operations
Consistent with market practice, the delivery of services on board mv Discovery and mv Minerva is mainly outsourced but is strategically, technically and commercially controlled by the senior management of the Company in the UK. There are two main suppliers for services on board the vessels, V Ships and Sea Chefs. V Ships employs the deck and engine crew responsible for the ships' maintenance, mechanical operations and health and safety. Sea Chefs employs the hotel and catering staff. Harding Brothers Limited are responsible for the operation of the onboard shop and spa. Celtic Marine (Guernsey) Limited, on behalf of All Leisure Holidays Limited, employs 15 key staff on mv Discovery and up to 38 on Hebridean Princess including the captains and chief engineers. Ship and crew management for Hebridean Princess is provided by Andrew Weir Shipping and Viking Recruitment respectively.
The mv Alexander von Humboldt is currently undergoing technical work and is therefore not in service, however as with mv Discovery and mv Minerva, V Ships employs the deck and engine crew responsible for the ship's maintenance, mechanical operations and health and safety.
(ii) Tour operating
Discover Egypt
In FY2008/09 Discover Egypt carried 9,000 passengers at an average price of £957 per passenger. This compares with passenger numbers in FY2007/08 of 11,579 at an average price of £776 per passenger.
The majority of Discover Egypt's customers take packaged holidays that include seven-night Nile cruises between Luxor and Aswan, flights, accommodation and a number of excursions. Other customers use Discover Egypt to arrange bespoke holidays. The majority of revenues are generated by direct sales to the public, mostly through its website, newspaper advertising and repeat customers. The business also produces brochures and uses a small number of agents.
Current Trading
Discover Egypt is seeing a greater propensity for bespoke two centre holidays which are being sold at a higher margin than the traditional one week Nile cruise. As a result, it is managing to diversify away from traditional one week cruises. Discover Egypt has been successful in meeting this demand given their extensive knowledge of its niche market. This trend has allowed it to continue differentiating its offering in the marketplace and to increase average spend per passenger in what are otherwise difficult trading conditions, characterised by significant discounting at the lower end of the market. At an operational level and given the current market environment in FY2008/09, Discover Egypt traded satisfactorily and continues to do so.
R D Bryant, Chief Executive
Finance Director's Report
As discussed in the Chairman's statement, trading has been challenging in the financial year and margins have been squeezed as a result, leading to a lower profit after tax of £2.7m compared with £8.8m last year. Despite this, the Group's financial position remains strong with net assets of £31.2m (2008: £30.4m). During the year the Group spent £1.3m acquiring mv Hebridean Princess, its trade and associated assets. After allowing for this the cash balance was broadly in line with last year. The Group continues to have sufficient liquidity in order to meet the demands of the business.
Hebridean Island Cruises
The most significant event of the year was the acquisition of the ship mv Hebridean Princess and its related assets and business for £1.3m. Alongside the ship, the Group acquired the trademark and customer relationships from the administrators of Hebridean International Cruises Ltd. The ship was valued on acquisition by an independent professional ship valuer which was substantiated by a further independent valuation as required by IFRS 3. This resulted in the assets acquired being attributed a fair value of £4.7m and a surplus of net assets, acquired over the fair value of consideration paid on acquisition, of £3.4m. This surplus was credited to the income statement in accordance with IFRS 3.
In order to preserve customer goodwill, the Group honoured the majority of 2009 bookings made and paid for pre-acquisition. As there was relatively little capacity left to sell for the summer 2009 season, this resulted in trading losses on acquired operations of £2.2m being made in the period. Cruise revenues foregone and subject to a claim against the previous operator's insurance policy are in the region of £2m. The directors are confident that Hebridean Island Cruises will be profitable in 2010 and the intangible assets acquired have consequently not been impaired.
Finance Team
During the year the finance team has been strengthened by the addition of two further qualified accountants. This additional resource has enabled planned improvements to control procedures to be introduced and more timely preparation of monthly financial information. In addition, an upgrade to the current accounting system is being investigated.
Hedging
The majority of the Group's cost base is US dollar denominated. The impact of sterling's decline against both the US dollar and the Euro was significantly mitigated in the year by foreign currency contracts entered into in previous years, resulting in foreign exchange net gains of £3.1m (2008:- £2.6m gain). In addition there was a gain of £1.8m arising from the early settlement of a number of outstanding currency contracts during the year. Hedging arrangements are in place for 2009-10 for the majority of the Group's forecast US dollar and Euro requirement in order to link as far as possible the Group's cost base with the budgeted rates used when setting prices.
The Group takes out derivative contracts to cover both fuel and foreign exchange requirements. Movements in derivative fair values (which are stated at fair value through profit and loss) are taken direct to the income statement, increasing the volatility of stated profits. Derivative related adjustments which would not arise under UK GAAP give rise to a loss effect of £1.9m (2008: £2.8m profit) and are reported within cost of sales and finance costs.
Results presentation and discussion
For clarity of presentation, and to enable meaningful performance commentary, the tables below present gross profit and profit before tax adjusted for certain derivative adjustments to exclude the material fluctuations in derivative fair valuations and arrangement fees which increase income statement volatility. The 2009 results show acquired operations and pre-existing operations separately to aide like for like comparison with prior year results.
Turnover
Swan Hellenic has operated the ship mv Minerva for the full year for the first time. This, together with both an uninterrupted programme for mv Discovery and post acquisition revenue from mv Hebridean Princess, has increased Group turnover by 9.0% to £73.6m compared with £67.5m in 2008.
Gross profit
|
Acquired 2009 £'000 |
Pre-existing 2009 £'000 |
Total 2009 £'000 |
2008 £'000 |
||
|
Gross (loss)/profit |
(203) |
8,765 |
8,562 |
16,757 |
|
|
Adjustment for opening and closing derivative adjustments |
- |
687 |
687 |
(2,777) |
|
|
Adjusted gross (loss)/profit |
(203) |
9,452 |
9,249 |
13,980 |
|
Gross profit, adjusted for certain derivative related adjustments decreased 33.8% to £9.2m (2008: £14.0m) with gross margin reducing from 20.7% to 12.6%. The year has been challenging on both an operational and a macro-economic level, with lower yields as a result of later booking patterns, a weakening of Sterling against both the US Dollar and European currencies significantly impacting operating costs.
Administrative expenses
Administrative expenses in 2008/09 were £9.4m compared with £9.2m in the prior year, an increase of £0.2m including the operations of Hebridean Island cruises.
Operating profit before certain derivative related adjustments
Operating profit before certain derivative related adjustments recorded in cost of sales decreased 31.2% to £3.3m (2008: £4.8m).
Investment revenues and finance costs
Investment revenues decreased 17.6% to £1.4m (2008: £1.7m). Many fixed rate deposits were made in the prior year before rates fell and as a result the Group's exposure to low interest rates available during the year was mitigated. Finance costs relate to a notional 4.5% interest charge on the ship loan required under IFRS and represents a non-cash item.
A premium paid of £1.2m for securing more favourable terms for 2010 US dollar currency derivative is recorded in finance costs.
Profit before taxation
|
Acquired 2009 £'000 |
Pre-existing 2009 £'000 |
Total 2009 £'000 |
2008 £'000 |
||
|
Profit before tax |
1,153 |
1,489 |
2,642 |
9,052 |
|
|
Adjustment for opening and closing derivative adjustments |
- |
687 |
687 |
(2,777) |
|
|
Adjustment for derivative contract arrangement fee |
- |
1,165 |
1,165 |
- |
|
|
Adjusted profit before tax |
1,153 |
3,341 |
4,494 |
6,275 |
|
Profit before taxation adjusted for certain derivative related items decreased by £1.8m to £4.5m in 2009, a decrease of 28.4%.
Taxation
The 2008 effective corporation tax rate was -2.5% (2008: 2.6%). The Group has reported a small tax credit in the year as the prior year corporation tax creditor has been released due to the tax charge being lower than provided for at the time the financial statements were signed. All ocean cruise shipping activities are taxed within the UK tonnage tax regime based on the net tonnage of the relevant vessel. All the Group's ships have qualified for tonnage tax status throughout the financial year.
Earnings per share
Basic and diluted earnings per share on an unadjusted basis were 4.4p (2008: 14.4p).
Cash Flows
Net cash inflow from operating activities was £3.3m lower than prior year at £2.3m (2008: £5.6m). Of significance to cash flow during the year were the acquisition of the ship mv Hebridean Princess and its related assets and business, resulting in a cash outflow of £1.3m, £1.8m repayment of the ship mv Discovery loan, £1.7m dividend payment and £1.3m interest receipt.
Total cash and balances at bank at the year end amounted to £31.2m (2008: £33.0m), of which £15.5m (2008: £3.3m) is classified as cash and cash equivalents, £2.9m (2008: £3.1m) classified as restricted cash, and £12.7m (2008: £26.6m) as interest bearing bank deposits. The Group has immediate access to all of these balances, other than the amounts reported as restricted cash.
Going concern
The Group continued to maintain its strong balance sheet throughout the year, ending as at 31 October 2009 with net assets of £31.2m (2008: £30.4m), net current assets of £8.7m (2008: £14.2m) and a (gross) gearing ratio (debt to equity) of only 10.4% (2008: 16.4%).
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out above and in the statements of the Chairman and Chief Executive.
The Group has significant cash and cash equivalents of £15.5m (2008: £3.3m) and in addition has interest bearing bank deposits with maturities more than three months after the balance sheet date of £12.7m (2008: £26.6m). The Group continues to have a portfolio of well established brands, high levels of passenger satisfaction and a committed and experienced management team. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
G S Marchant
Finance Director
Consolidated Income Statement
For the year ended 31 October 2009
|
Note |
2009 £'000 |
2009 £'000 |
2009 £'000 |
2008 £'000 |
|
|
Acquired Operations |
Pre-existing Operations |
Total |
Total |
||
|
Revenue |
4,5 |
2,357 |
71,237 |
73,594 |
67,512 |
|
Cost of sales |
6 |
(2,560) |
(62,472) |
(65,032) |
(50,755) |
|
Gross (loss)/profit |
(203) |
8,765 |
8,562 |
16,757 |
|
|
Administrative expenses |
(2,020) |
(7,370) |
(9,390) |
(9,192) |
|
|
Excess of acquirer's interest in the net fair value of the acquiree's identifiable assets and liabilities over the cost of acquisition |
11 |
3,376 |
- |
3,376 |
- |
|
Rental income |
- |
29 |
29 |
34 |
|
|
Operating profit/(loss) |
7 |
1,153 |
1,424 |
2,577 |
7,599 |
|
Investment revenue |
- |
1,438 |
1,438 |
1,681 |
|
|
Finance costs |
- |
(1,373) |
(1,373) |
(228) |
|
|
Profit before taxation |
1,153 |
1,489 |
2,642 |
9,052 |
|
|
Tax (charge)/credit |
8 |
(2) |
67 |
65 |
(238) |
|
Profit for the financial year |
1,151 |
1,556 |
2,707 |
8,814 |
|
|
Earnings per share (pence): |
10 |
||||
|
Basic |
4.4p |
14.4p |
|||
|
Diluted |
4.4p |
14.4p |
|||
There were no discontinued operations during the year.
All results are attributable to equity holders of the parent Company.
Consolidated Statement of Changes in Equity
At 31 October 2009
|
Note |
Share capital £'000 |
Share premium account £'000 |
Revaluation reserve £'000 |
Currency Translation Reserve £'000 |
Retained earnings £'000 |
Total £'000 |
|
|
At 1 November 2007 |
615 |
12,774 |
11 |
10 |
10,749 |
24,159 |
|
|
Profit for the financial year |
- |
- |
- |
- |
8,814 |
8,814 |
|
|
Total income for the financial year |
- |
- |
- |
- |
8,814 |
8,814 |
|
|
Dividends paid |
- |
- |
- |
- |
(3,070) |
(3,070) |
|
|
Exchange gain on translation of subsidiary entities |
- |
- |
- |
455 |
- |
455 |
|
|
At 1 November 2008 |
615 |
12,774 |
11 |
465 |
16,493 |
30,358 |
|
|
Profit for the financial year |
- |
- |
- |
- |
2,707 |
2,707 |
|
|
Total income for the financial year |
- |
- |
- |
- |
2,707 |
2,707 |
|
|
Issue of share capital |
2 |
572 |
- |
- |
- |
574 |
|
|
Dividends |
9 |
- |
- |
- |
- |
(2,251) |
(2,251) |
|
Share options credit |
- |
- |
- |
- |
52 |
52 |
|
|
Revaluation of properties |
- |
- |
36 |
- |
- |
36 |
|
|
Exchange loss on translation of subsidiary entities |
- |
- |
- |
(241) |
- |
(241) |
|
|
At 31 October 2009 |
617 |
13,346 |
47 |
224 |
17,001 |
31,235 |
|
Consolidated Balance Sheet
At 31 October 2009
|
2009 £'000 |
2008 £'000 |
|
|
Non-current assets |
||
|
Intangible assets |
6,143 |
3,130 |
|
Property, ships, plant and equipment |
15,389 |
14,882 |
|
Investment property |
268 |
272 |
|
Restricted bank balances |
2,487 |
2,635 |
|
24,287 |
20,919 |
|
|
Current assets |
||
|
Inventories |
1,307 |
1,485 |
|
Trade and other receivables |
4,860 |
5,041 |
|
Derivative financial instruments |
2,506 |
3,686 |
|
Interest bearing bank deposits |
12,732 |
26,645 |
|
Restricted bank balances |
455 |
464 |
|
Cash and cash equivalents |
15,516 |
3,264 |
|
Total current bank balances and cash in hand |
28,703 |
30,373 |
|
37,376 |
40,585 |
|
|
Total assets |
61,663 |
61,504 |
|
Current liabilities |
||
|
Trade and other payables |
(25,456) |
(24,230) |
|
Current tax liabilities |
(13) |
(60) |
|
Borrowings |
(3,251) |
(1,645) |
|
Derivative financial instruments |
- |
(493) |
|
(28,720) |
(26,428) |
|
|
Non-current liabilities |
||
|
Borrowings |
- |
(3,330) |
|
Deferred tax liabilities |
(54) |
(54) |
|
Provisions |
(1,654) |
(1,334) |
|
(1,708) |
(4,718) |
|
|
Total liabilities |
(30,428) |
(31,146) |
|
Net assets |
31,235 |
30,358 |
|
Equity |
||
|
Share capital |
617 |
615 |
|
Share premium account |
13,346 |
12,774 |
|
Revaluation reserve |
47 |
11 |
|
Currency translation reserve |
224 |
465 |
|
Retained earnings |
17,001 |
16,493 |
|
Total equity |
31,235 |
30,358 |
Consolidated Cash Flow Statement
For the year ended 31 October 2009
|
Note |
2009 £'000 |
2008 £'000 |
|
|
Net cash inflow from operating activities |
12 |
2,255 |
5,550 |
|
Investing activities |
|||
|
Interest received |
1,334 |
1,476 |
|
|
Acquisition of subsidiary |
- |
900 |
|
|
Rental income |
29 |
34 |
|
|
Purchase of mv Hebridean Princess and associated trade |
11 |
(1,315) |
- |
|
Purchases of property, plant and equipment |
(720) |
(268) |
|
|
Movement to short-term interest bearing cash deposits |
13,913 |
(9,551) |
|
|
Net cash from / (used in) investing activities |
13,241 |
(7,409) |
|
|
Financing activities |
|||
|
Dividends paid |
(1,677) |
(3,070) |
|
|
Repayment of loans |
(1,820) |
(1,667) |
|
|
Management of liquid resources - bank deposits |
102 |
(1,988) |
|
|
Net cash used in financing activities |
(3,395) |
(6,725) |
|
|
Net increase / (decrease) in cash and cash equivalents |
12,101 |
(8,584) |
|
|
Cash and cash equivalents at the start of the year |
3,264 |
10,599 |
|
|
Effect of foreign exchange rate changes |
151 |
1,249 |
|
|
Cash and cash equivalents at the end of the year |
15,516 |
3,264 |
|
1. Financial information
The financial information has been abridged from the financial statements for the year ended 31 October 2009 and year ended 31 October 2008. The consolidated financial statements have been prepared under the historical cost convention. The Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have chosen to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The Group financial statements are also required by law to be properly prepared in accordance with Companies Act 2006 and the AIM Rules for Companies. The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 October 2008 or 31 October 2009. The statutory accounts for the year ended 31 October 2008 have been delivered to the registrar of Companies and Statutory accounts for the year ended 31 October 2009 will be filed with the Registrar in due course. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in February 2010.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below. The financial statements have been prepared on a going concern basis. The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 October 2009. Certain parts thereof are not included within this announcement. We confirm to the best of our knowledge:
|
the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and |
|
|
the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. |
This responsibility statement was approved by the board of directors on 22nd January 2010 and is signed on its behalf by:
Roger Allard
Guy Marchant
Executive Chairman
Chief Financial Officer
A copy of the Group's full annual report for the year ended October 31 2009 will shortly be available on the Group's website at www.allleisuregroup.com
2. Significant accounting policies
(i) Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below.
The financial statements have been prepared on a going concern basis as discussed in the Financial Director's Report and Corporate Governance Statement.
(ii) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 October each year. Control is achieved when the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
All subsidiaries are 100% owned and there are no minority interests in the Group.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the IFRS policies used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
(iii) Business combinations
The acquisition of subsidiary undertaking or a business undertaking are accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.
The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.
(iv) Foreign exchange
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the Group's foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.
(v) Property, ships, plant and equipment
Property, ships, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment in value.
(vi) Depreciation
Depreciation is provided on all property, dry docks, ship improvements and plant and equipment, other than freehold land, at rates calculated to write off the cost or revalued amount, less estimated residual value of each asset evenly over its expected useful life, as follows:
|
Freehold land and buildings |
2% per annum straight line |
|
Ship - mv Discovery |
Not depreciated |
|
Ship - mv Hebridean Princess |
Over 10 years |
|
Dry dock assets |
Over period to next planned dry dock |
|
Ship leasehold improvements |
Over lease period |
|
Ship improvements, fixtures and fittings |
10% - 20% per annum straight line |
|
Office equipment |
20% per annum reducing balance |
The carrying values of property, ships, plant and equipment are reviewed at least annually for impairment or if events or changes in circumstances indicate the carrying value may not be recoverable.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Land and buildings held for administrative purposes are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. All freehold property was revalued in the year.
Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties' revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties' revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to income. On the subsequent sale of a revalued property, the attributable revaluation surplus remaining in the properties' revaluation reserve is transferred directly to retained earnings.
(vii) Investment property
Investment property, which is property held to earn rentals, is stated at deemed cost as the Group elected, under the transitional arrangements available under IFRS 1, to use the previous carrying value under UK GAAP as deemed cost on transition to IFRS. The investment property is depreciated on a straight-line basis at 2% per annum. The land on which it is situated is not depreciated.
(viii) Intangible assets
Intangible assets with a finite useful life are carried at cost less amortisation and any impairment losses. Intangible assets represent items which meet the recognition criteria of IAS 38, "Intangible Assets".
Amortisation of intangible assets is calculated over the following periods:
|
Customer relationships |
- 5% - 10% per annum straight line |
|
Trademarks |
- 2% - 4% per annum straight line |
|
Computer software |
- 25% per annum straight line |
(ix) Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(x) Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet at fair value when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement' financial assets are classified into the following specified categories:
|
financial assets 'at fair value through profit or loss' (FVTPL); |
|
|
'held-to-maturity' investments; |
|
|
'available-for-sale' (AFS) financial assets; and |
|
|
'loans and receivables'. |
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Currently the Group has financial assets classified as 'loans and receivables' and financial assets at 'fair value through profit or loss'. No financial assets are classified as 'held to maturity' or 'available-for-sale'.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.
The principal financial assets included in this measurement category are:
Trade receivables
Trade receivables represent net amounts receivable and payments made in the normal course of business. All amounts which are not interest bearing are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts, which are charged to the income statement.
Bank balances and cash in hand
Bank balances and cash in hand comprises all balances held by the Group with banking institutions and cash in hand (principally held on board the ships). This category includes the following:
|
At an operational level, and given the current market environment in FY2008/09 and continues to do soshort and long term restricted bank balances which comprises bank deposits over which counterparties have guarantees charged, such that the Group cannot access the funds until the guarantee is released. The principal amounts of this nature arise from the bare boat charter agreement for mv Minerva, which has a cash guarantee in place for $4.1m; and, |
|
|
interest bearing bank deposits with a maturity of over three months. Whilst the Group has immediate access to these funds, the Group typically retains these funds in the deposit account until the deposit term expires as the counterparty financial institution has the right to restrict interest payments in the event of early withdrawal. |
Financial assets at FVTPL
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. The Group has not designated any financial assets as being at FVTPL and accordingly only holds financial instruments in this category that are deemed to be held for trading under the provisions of IAS 39.
With respect to the Group, all financial assets that are held for trading are derivative instruments that are not designated and effective as hedging instruments (see the derivative accounting policy below).
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been reduced.
Objective evidence of impairment could include:
|
significant financial difficulty of the counterparty; or |
|
|
default on payments; or |
|
|
it becoming probable that the counterparty will enter bankruptcy or financial re-organisation. |
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are immediately recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the income statement to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
De-recognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. The Group has not designated any financial liabilities as being at FVTPL and accordingly only holds financial instruments in this category that are deemed to be held for trading under the provisions of IAS 39.
With respect to the Group, all financial liabilities that are held for trading are derivative instruments that are not designated and effective as hedging instruments (see the derivative accounting policy below).
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. 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, or, where appropriate, a shorter period.
De-recognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
(xi) Derivative financial instruments
The Group's activities expose it primarily to the financial risks of changes in foreign exchange rates and changes in the price of fuel for the ships. Derivative financial instruments are used by the Group to hedge its exposure to movements in currency exchange rates and movements in the price of fuel. The Group does not use derivative financial instruments for speculative purposes.
Whilst the Group's derivatives do not meet the hedge classification criteria of IAS 39, the derivatives operate as economic hedges against movements in the price of fuel, and foreign exchange rates, principally linked to items included within cost of sales. Accordingly, the Group includes the fair value movements on derivative financial instruments meeting the criteria of economic hedges within cost of sales.
Derivative financial instruments are measured at fair value as described above.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
(xii) Dividends
Dividends are provided for in the period in which they become a binding liability on the Group.
(xiii) Provisions
A provision is recognised in the balance sheet when the Group has 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. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
(xiv) Inventories
Inventories representing engineering spares, fuels and lubricants are stated at the lower of cost (being purchase price to the Group) and net realisable value.
Where necessary, provision is made for obsolete and damaged stocks.
(xv) Leases
Leases taken by the Group are assessed individually as to whether they are finance leases or operating leases.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease rental payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The benefit of any lease incentives is spread over the term of the lease.
All Group leases (which include Bareboat Charter agreements) are classified as operating leases.
(xvi) Taxation
The tax expense represents the sum of current tax expense and deferred tax expense. Current tax expense is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods 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 substantively enacted by the balance sheet date. Certain of the Group subsidiary companies are subject to taxation under the UK Tonnage Tax regime. Under this regime, a shipping company may elect to have its taxable profits computed by reference to the net tonnage of each of the qualifying ships it operates.
Deferred tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for accounting purposes. Deferred tax balances are not significant to the Group due to the majority of the operations being within the tonnage tax regime, or taxed on a basis equivalent to the accounting basis.
Where relevant, deferred tax is measured at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based upon tax rates and legislation that have been enacted or substantively enacted at that balance sheet date. Deferred tax is charged or credited to the income statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.
(xvii) Share capital and share premium account
There is one class of shares. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium account.
Incremental external costs directly attributable to the issue of new shares are recorded in equity as a deduction, net of tax, in the share premium account.
(xviii) Share-based payment
The Group has applied the requirements of IFRS 2, 'Share-based Payment', to all grants of equity instruments. The Group issued equity-settled share-based payments to its former NOMAD in the year ended 31 October 2007 and has issued equity-settled share- based payments to directors in the year ended 31 October 2009. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) of the equity instruments at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments was expensed immediately as the options vested on grant. The fair value excludes the effect of non market-based vesting conditions.
Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
(xix) Revenue recognition
Revenue comprises sales to third parties (excluding VAT and similar sales and port and other taxes). Cruise revenues, together with revenues from onboard and other activities, which include transportation and shore excursion revenues, are recognised in income upon completion of a voyage or on a pro rata basis for cruises underway at the period end.
Client monies received at the balance sheet date relating to holidays commencing after the year end are deferred and included within trade and other payables.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
(xx) Retirement benefit costs
The Group operates a defined contribution pension scheme. The amount charged to the income statement in respect of pension costs and other post-retirement benefits is the contributions payable in the year.
Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
(xxi) Operating profit
Operating profit is stated before investment income and finance costs.
(xxii) Borrowing costs
All borrowing costs are recognised in profit or loss in the period in which they are incurred.
3. Critical accounting judgements and key sources of estimates uncertainty
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.
(i) Residual value of mv Discovery and depreciation
As in the prior year, the residual value of mv Discovery is measured on the basis of an operating cruise ship at the current projected end of the economic life to the Group. It is intended that the Group will sell the ship to a third party as an operating cruise ship at the end of its useful life to the Group. The estimate of the residual value reflects independent specialist advice received by the Company from a member of the Institute of Chartered Ship Brokers, relating to the likely disposal value of the ship being $31.0m at 31 October 2008, and at the projected end of the economic life to the Group. This advice indicates that the ship has reached a certain age, such that the passage of time has a much less significant impact on the value of the ship than the state of repair and maintenance. mv Discovery is maintained to a high and increasing standard through ongoing maintenance programmes and regular dry docks such that the residual value is not considered to be decreasing over time in real terms. The residual value exceeds the carrying value. The Directors reviewed and concluded that the valuation at 31 October 2008 was significantly in excess of its carrying value at 31 October 2009.
(ii) Residual value of mv Hebridean Princess and depreciation
The operational life of mv Hebridean Princess is currently restricted by the longevity of the engines. An exercise will be undertaken in the next financial year to ascertain whether it will be economically possible to replace the current engines on the ship and thereby extend the life of the ship beyond ten years.
Due to the uniqueness of the ship the Directors do not currently consider that it is appropriate to assume that it will be economically possible to replace the engines. They have therefore concluded that the residual value of the ship in ten years time will be its scrap value. The residual value has therefore been based on the market price of steel scrap as at the balance sheet date.
(iii) Hebridean Princess transaction
On 23 April 2009 the Group acquired the ship mv Hebridean Princess, trade, various related assets and immaterial detention creditors from the administrators of Hebridean International Cruises Limited. The administration of that company provided the Group with an opportunity to acquire valuable assets at an attractive price compared to the fair value that would be payable in an open market transaction (a 'bargain transaction'). The Directors have determined that the transaction meets the criteria of a business combination under IFRS 3, 'Business combinations'. In arriving at this conclusion the Directors assessed that the assets acquired, being a combination of tangible and intangible assets enabling the performance of the full operation of mv Hebridean Princess, comprised an integrated set of activities and assets that operate collectively as a business to generate economic benefits.
Immediately prior to the date of acquisition, the Directors commissioned a ship valuation from an independent qualified ship valuer to assist in assessing the acquisition. mv Hebridean Princess was valued at US$6m. Due to the unique nature of the vessel, this valuation includes both the value of the core ship and her trade.
The value ascribed by the ship valuer to mv Hebridean Princess, aggregated with the Directors' or administrator's valuation of other assets and liabilities acquired comprising stock, fixtures and fittings, detention creditors and the Hebridean Spirit customer database exceeded the cash consideration paid for the trade and assets, which amounted to £1.3m.
As part of this process the Directors commissioned an independent valuation from a firm of Independent Chartered Accountants of the mv Hebridean Princess intangible assets acquired using a recognised valuation methodology. This independent valuation provided a separable open market value for customer relationships and the Hebridean Princess brand. Taking into consideration all available evidence provided by the independent valuation of the ship and associated intangible assets in aggregate (which represents a market price for the identified and related assets) the separate valuation of intangible assets and tangible assets, and the book value or comparable active market value of other assets and liabilities acquired, the Directors concluded that there was sufficient evidence to support the recognition of a gain arising from the bargain purchase. An excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets and liabilities over the cost of the acquisition arose amounting to £3.4m. This was immediately credited to the income statement as required by IFRS 3, and recorded as a material non-recurring item.
(iv) Insurance claims
During the prior year, the generators on mv Minerva, the Group's leased ship, ceased to operate and were replaced with enhanced, more fuel efficient generators. The replacement is the subject of an insurance claim that the Group is in the process of negotiating.
In the current year, the Directors have progressed the insurance claim which has a total value of US$4m. The Directors have secured agreement from the underwriters to a payment on account of £0.9m (USD$1.5m), of which £0.5m had been received by 31 October 2009. The remaining £0.4m of this payment on account has subsequently been received. The Directors are pursuing the remaining claim vigorously and will recognise this as income upon receipt.
(v) Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
(vi) Valuation of derivative financial instruments
The Group has significant derivative assets and liabilities on balance sheet as at 31 October 2008 and 31 October 2009, which are carried at fair value as required by IAS 39, Financial instruments: Recognition and Measurement. The fair value is reported in the income statement, and creates volatility in reported results. The Group is fortunate to have significant technical knowledge on derivatives in house through the experience and expertise of the Board. The Group believes that the estimation of the derivative market value at the year end is based on appropriate estimates. The Group notes though that the valuation of derivative financial instruments requires significant estimates, and is subject to change outside of the control of the Group, through changes in forward currency rates and changes in fuel prices between the balance sheet date and the date that the relevant contracts mature.
(vii) Dry dock provisions
The bareboat charter agreement for mv Minerva establishes certain minimum return conditions on the vessel at the end of the agreement. To the extent that these are considered unavoidable, the Group records a provision for the best estimate of the expected expenditure to be incurred, with a corresponding asset recorded. The asset is depreciated to the date that the work is planned to be completed. The estimation of the provision requires significant judgment, and has inherent uncertainties relating to the cost of the work to be completed. Further, the liability will be settled principally in Euro, and is carried in a US Dollar functional currency entity. Accordingly, the level of the liability at Group level is subject to both fluctuations in value between the US$ and Euro exchange rate, and the Euro and sterling exchange rate. Due to the significance of the provided amounts, the estimate of the provision and associated foreign exchange fluctuations can create volatility in the Group reported financial position and financial performance, and ultimately in the Group cash flows in the period that the repair and maintenance obligations are discharged.
(viii) Impairment reviews
The Directors have considered whether the assets of the Group are impaired at the balance sheet date. The principal assets, other than cash, are attributable to either the Swan Hellenic, the Voyages of Discovery or the Hebridean Island Cruises brands. The principal asset in the Voyages of Discovery brand is the ship, mv Discovery, which is not considered to be impaired due to the factors noted above in the section on key accounting judgments relating to the residual value of the ship exceeding its carrying value.
The Group has completed a detailed impairment review of the assets in the Swan Hellenic and Hebridean Island Cruises cash generating units (CGUs). The table below summarises the results of that impairment review:
|
Book Value £'000 |
Recoverable amount £'000 |
Surplus of Recoverable amount over book value £'000 |
|
|
Swan Hellenic CGU |
3,976 |
13,894 |
9,918 |
|
Hebridean Island Cruises CGU |
4,358 |
10,022 |
5,664 |
In determining the recoverable amount, the Group has used the following principal inputs:
|
Measure |
|
|
Discount rate - pre tax |
12.5%/ 15.0% |
|
Cash flow forecast period |
5 years + terminal value |
|
Rate of increase of cash flows beyond the budget period |
2% |
Based on this review, the Group is satisfied that the assets of Swan Hellenic and Hebridean Island Cruises are not impaired at the balance sheet date. The Directors note that the assumptions made in preparing the impairment review have a significant impact on the recoverable amount of the CGU, and actual events may differ materially from expectation.
4. Revenue
An analysis of the Group's revenue is as follows:
|
2009 £'000 |
2008 £'000 |
|
|
Continuing operations |
||
|
Sales of cruise holidays and ancillary services |
64,979 |
58,524 |
|
Sales of package holidays |
8,615 |
8,988 |
|
73,594 |
67,512 |
|
|
Property rental income |
29 |
34 |
|
Investment income |
1,438 |
1,681 |
|
75,061 |
69,227 |
|
Ancillary services revenue included within sales of cruise holiday and ancillary services includes all revenue derived directly from the cruise holidays sold, other than the principal cruise. Ancillary services revenue includes excursions revenue, on board revenue such as bar, laundry and other, and insurance income. None of these revenue streams account for more than 10% of the overall revenue and are considered by the Directors to be a component of the overall revenues derived on cruises.
5. Business and geographical segments
Business segments
For management purposes, the Group is currently organised into two operating divisions as follows:
Cruising: This is the Group's largest segment and includes the operation of mv Discovery, mv Minerva, Mv Hebridean Princess and Swan river cruises. Revenue streams are principally from the UK but also from the USA and rest of the world.
Tour operating: This segment represents the Group's Discover Egypt operation, providing holidays in Egypt to the UK market.
These divisions are the basis on which the Group reports its primary segment information.
Segment information about these businesses is presented below:
|
Cruising 2009 £'000 |
Tour Operating 2009 £'000 |
Consolidated 2009 £'000 |
Cruising 2008 £'000 |
Tour Operating 2008 £'000 |
Consolidated 2008 £'000 |
|
|
Revenue |
||||||
|
External sales |
64,979 |
8,615 |
73,594 |
58,524 |
8,988 |
67,512 |
|
Total revenue |
64,979 |
8,615 |
73,594 |
58,524 |
8,988 |
67,512 |
|
Result |
||||||
|
Segment result |
4,130 |
(280) |
3,850 |
8,154 |
666 |
8,820 |
|
Unallocated corporate expenses |
(1,273) |
(1,221) |
||||
|
Operating profit |
2,577 |
7,599 |
||||
|
Investment revenues |
1,438 |
1,681 |
||||
|
Finance costs |
(1,373) |
(228) |
||||
|
Profit before tax |
2,642 |
9,052 |
||||
|
Tax |
65 |
(238) |
||||
|
Profit for the financial year |
2,707 |
8,814 |
||||
|
Other information |
Cruising 2009 £'000 |
Tour Operating 2009 £'000 |
Consolidated 2009 £'000 |
Cruising 2008 £'000 |
Tour Operating 2008 £'000 |
Consolidated 2008 £'000 |
|
Capital additions |
5,454 |
- |
5,454 |
1,804 |
- |
1,804 |
|
Depreciation and amortisation |
1,657 |
- |
1,657 |
1,181 |
- |
1,181 |
|
Balance sheet |
||||||
|
Assets |
||||||
|
Segment assets |
53,125 |
103 |
53,228 |
48,362 |
685 |
49,047 |
|
Unallocated corporate assets |
8,435 |
12,457 |
||||
|
Consolidated total assets |
61,663 |
61,504 |
||||
|
Liabilities |
||||||
|
Segment liabilities |
(24,894) |
(2,229) |
(27,123) |
(22,055) |
(4,062) |
(26,117) |
|
Unallocated corporate liabilities |
(3,305) |
(5,029) |
||||
|
Consolidated total liabilities |
(30,428) |
(31,146) |
||||
The unallocated corporate assets primarily relate to cash and group properties.
Geographical segments
The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services:
|
Sales revenue by geographical market |
||
|
2009 £'000 |
2008 £'000 |
|
|
UK |
62,470 |
55,188 |
|
USA |
7,212 |
9,505 |
|
Rest of the world |
3,912 |
2,819 |
|
73,594 |
67,512 |
|
The following is an analysis of the carrying amount of segment assets, and additions to property, ships, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:
|
Carrying amount of segment assets |
Additions to property, plant and equipment and intangible assets |
|||
|
2009 £'000 |
2008 £'000 |
2009 £'000 |
2008 £'000 |
|
|
UK |
61,147 |
61,017 |
5,454 |
1,804 |
|
USA |
516 |
487 |
- |
- |
|
Rest of the world |
- |
- |
- |
- |
|
61,663 |
61,504 |
5,454 |
1,804 |
|
6. Derivatives
The Group has in place various derivative financial instruments comprising fuel and currency contracts. These contracts do not qualify for hedge accounting under IAS 39, and accordingly are revalued through the income statement at each balance sheet date, resulting in a net income statement gain or loss reported in cost of sales and finance costs.
These contracts represent economic hedges against the Group's future exposure to commodity and currency fluctuations. Accordingly, while they are included in the current year income statement in arriving at gross profit, they relate to items that may eventually be cash flows in future periods. The Group believes it is beneficial for users of the financial statements to present the impact on the income statement of these derivative financial instruments in determining earnings per share to the extent that they would not impact the Group's results were they presented under UK GAAP.
|
2009 £'000 |
2008 £'000 |
|
|
Reversal of prior year end unrealised revaluation |
(3,193) |
1,006 |
|
Recognition of current year end unrealised revaluation on currency contracts |
1,097 |
3,686 |
|
Recognition of current year end unrealised revaluation on fuel contracts |
1,409 |
(493) |
|
Realised loss on fuel contract * |
- |
(1,422) |
|
(Loss)/gain reported in cost of sales |
(687) |
2,777 |
|
Foreign currency contract premium payable included in finance costs** |
(1,165) |
- |
|
Total (loss)/gain |
(1,852) |
2,777 |
* One of the Group's contracts was renegotiated on 31 October 2008 to reset the forward fuel price closer to the market rates as at that date. Accordingly, the Group presents this item in the above reconciliation as the payment represents the negotiated amount required to settle forward liabilities on the contract.
** The Group paid a premium to secure more favourable terms for a 2010 US dollar currency derivative contract
7. Operating profit
|
2009 £'000 |
2008 £'000 |
|||||
|
Operating profit has been arrived at after (crediting) / charging: |
||||||
|
Foreign exchange gains |
(3,116) |
(2,621) |
||||
|
Gain on early settlement of derivative contracts |
(1,787) |
- |
||||
|
Depreciation of property, ships, plant and equipment |
1,290 |
907 |
||||
|
Depreciation of investment property |
4 |
4 |
||||
|
Impairment of freehold land and buildings |
96 |
- |
||||
|
Amortisation of intangibles assets:- included in cost of sales |
355 |
265 |
||||
|
Amortisation of intangibles assets:- included in administrative expenses |
8 |
5 |
||||
|
Staff costs |
5,394 |
5,114 |
||||
|
Adjustments arising from certain derivative financial instruments |
687 |
(2,777) |
||||
|
Excess of acquirer's interest in the net fair value of acquiree's identifiable assets and liabilities over the cost of the Hebridean Princess and other associated assets and business acquisition |
(3,376) |
- |
||||
|
Minerva generator failure additional costs - included in cost of sales |
678 |
1,052 |
||||
|
Minerva generator insurance claim - included in cost of sales |
(910) |
- |
||||
|
Swan Hellenic start up costs - included in administrative expenses |
- |
370 |
||||
Foreign exchange gains and losses
All foreign exchange gains and losses on bank balances are reported in administrative expenses (being £0.2m for 2009, and £1.2m for 2008). Other foreign currency gains and losses including those on the settlement of derivatives are reported in cost of sales.
Gain on early settlement of derivative contracts
The Group settled a number of forward currency contracts with Allied Irish bank before the end of their contractual term. The Group realised a gain of £1.8m on this transaction.
Excess of acquirer's interest in the net fair value of acquiree's identifiable assets and liabilities over the cost of the Hebridean Princess and other associated assets and business acquisition
On 23 April 2009 the Group acquired the trade and various related assets and liabilities, including the ship mv Hebridean Princess, from the administrators of Hebridean International Cruises Limited. Details of the assets and liabilities acquired, their fair values and the consideration paid are shown in note 11. At the time of the acquisition both the administrators and the Group believed it was necessary for the acquirer to honour the cruise bookings made with the previous owners in order to maintain the brand and the goodwill of the ships loyal following of customers. The price the Group paid for the vessel, associated assets and its trade reflected this. However, as there was no requirement on the group to honour these bookings no liability for this has been included in the assets and liabilities acquired in note 11. Consequently, the fair value of the net assets and liabilities acquired was greater than the consideration paid leading to a discount on acquisition of £3,376,000 which has been recognised in the income statement.
mv Minerva generator failure additional costs
mv Minerva suffered the failure of both her generators during the prior year which resulted in temporary generators having to be hired pending a permanent repair, and additional harbour and dry dock costs being incurred. Additional costs were incurred in the current year in excess of the forecast costs accrued in the prior year.
mv Minerva generator insurance payment on account
During the year the Directors lodged a claim on the mv Minerva's hull and machinery insurance policy for costs incurred in acquiring and fitting two generators. The underwriters have agreed a payment on account of $1.5m (£0.9m), of which £0.4m had been received at 31 October 2009. Please refer to note 3 for further details concerning the overall treatment in the financial statements of the generator failure and associated insurance claim.
Swan Hellenic start up costs
Swan Hellenic start up costs relate to increased marketing and office costs incurred prior to the launch of the Swan Hellenic programme in May 2008.
8. Tax (credit)/charge
a) Tax (credit)/charge on profit
|
2009 £'000 |
2008 £'000 |
|
|
Current tax |
||
|
- Current year |
15 |
81 |
|
- Adjustment with respect to prior years |
(80) |
(42) |
|
Total current tax |
(65) |
39 |
|
Deferred tax |
- |
199 |
|
Total tax (credit)/charge |
(65) |
238 |
b) Factors affecting the tax (credit)/charge for the year
The tax assessed for the year is lower than that resulting from applying the standard rate of corporation tax in the UK of 28.0% (2008 - 28.8%). The differences are explained below:
|
2009 £'000 |
2009 % |
2008 £'000 |
2008 % |
|
|
Profit before tax: Continuing operations |
2,642 |
- |
9,052 |
- |
|
Tax at the UK corporation tax rate of 28.0% (2008: 28.8%) |
740 |
28.0 |
2,607 |
28.8 |
|
Adjustments from: Income taxed under the tonnage tax regime |
(1,042) |
(39.4) |
(2,542) |
(28.1) |
|
Expenses not allowable for tax purposes |
128 |
4.9 |
212 |
2.3 |
|
Unutilised losses carried forward |
195 |
7.4 |
8 |
0.1 |
|
Marginal rate differences |
(6) |
(0.3) |
(5) |
- |
|
Adjustment in respect of prior years |
(80) |
(3.0) |
(42) |
(0.5) |
|
Total tax and effective tax rate |
(65) |
(2.5) |
238 |
2.6 |
For accounting periods beginning on or after 1 January 2000 a shipping company or group may elect to have its taxable profits computed by reference to the net tonnage of each qualifying ship it operates subject to meeting various conditions. Accordingly, the majority of the Group's profits are not subject to taxation under the normal corporation tax regime. This results in a significant reduction in the taxation liability of the Group, reflected above in the income taxed under tonnage tax regime line item.
9. Dividends
|
2009 £ |
2008 £ |
|
|
Amounts recognised as distributions to equity holders in the period: |
||
|
Final dividend for the year ended 31 October 2008 of 1.22p (2007: 5.00p) per share. |
753 |
3,070 |
|
Interim dividend for the year ended 31 October 2008 of 2.44p (2007: nil) per share. |
1,498 |
- |
|
2,251 |
3,070 |
|
|
Amounts proposed not recognised in the period: |
||
|
Interim dividend for the year ended 31 October 2009 of 0.6p (2008: 2.44p) per share |
370 |
1,498 |
|
Proposed final dividend for the year ended 31 October 2009 of 1.22p (2008: 1.22p) per share. |
753 |
753 |
|
1,123 |
2,251 |
|
The interim dividend of £370,000 was payable to shareholders on the register on 16 October 2009 and was paid on 12 November 2009. Interim dividends only become binding liabilities on the Company when declared as paid and accordingly, the interim dividend in respect of financial year 2008/9 has not been included as a liability in these financial statements.
The proposed final dividend of £753,000 is subject to approval by shareholders at the Annual General Meeting and has also not been included as a liability in these financial statements.
10. Earnings per share
|
2009 |
2008 |
|
|
Pence |
Pence |
|
|
Basic |
4.4p |
14.4p |
|
Diluted |
4.4p |
14.4p |
The calculation of the basic and diluted earnings per share is based on the following data:
|
Earnings |
£'000 |
£'000 |
|
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent |
2,707 |
8,814 |
|
Number of shares |
No. |
No. |
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
61,734,584 |
61,406,556 |
|
Effect of potential dilutive ordinary shares: |
||
|
Options |
- |
2,402 |
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
61,734,584 |
61,408,958 |
All results derive from continuing operations and accordingly total earnings per share and earnings per share from continuing operations are the same.
11. Acquisition of MV Hebridean Princess and the business undertaking, various assets and liabilities from the administrators of Hebridean International Cruises Limited
On 23 April 2009, the Group acquired the trade and various related assets and liabilities, including the ship mv Hebridean Princess from the administrators of Hebridean International Cruises Limited.
The excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets and liabilities over the cost of acquisition arose, amounting to £3,376,000. This is calculated as follows:
|
Provisional Fair Value £'000 |
|
|
Net assets acquired |
|
|
Tangible fixed assets: |
|
|
- mv Hebridean Princess |
1,358 |
|
Intangible fixed assets: |
|
|
- Customer relationships |
2,489 |
|
- Brand/trademarks |
593 |
|
- Customer databases |
294 |
|
Inventories |
24 |
|
Detention creditors |
(67) |
|
4,691 |
|
|
Discount on acquisition |
(3,376) |
|
Satisfied by cash |
1,315 |
As required by IFRS 3, the discount on acquisition has been credited to the income statement.
The following methodologies were applied to determine the fair value of assets and liabilities acquired:
mv Hebridean Princess - the value was determined based on the replacement cost of a similarly equipped vessel, based on extrapolated available market evidence for the sale of vessels of a similar tonnage. This valuation was performed by an independent qualified ship valuer.
Customer relationships - the value was determined by using an excess earnings model and assessed using a range of possible inputs, based on an independent valuation performed by a firm of Chartered Accountants and valuation specialists.
Brand - the value was determined using a relief of royalty valuation, again by the independent firm of Chartered Accountants and valuation specialists.
Customer databases - the value was determined by reference to the active market that exists in the purchase of access to relevant and comparable customer databases and the Group's previous experience of such purchases adjusted to reflect the most conservative future economic benefits to the Group. The value was determined by an independent firm of Chartered Accountants and valuation specialists.
Inventories and detention creditors - the value was determined by reference to the book value, which is considered to represent the fair value.
The fair values reported above are provisional pending final settlement with the administrators which may alter the value of the detention creditors. The previous UK GAAP book value of the assets acquired was £1.6m. It would be impracticable to determine what the previous book value of the assets would have been under IFRS.
Including unavoidable future operating losses arising under onerous contracts of £0.1m and excluding the gain reported for the bargain purchase of £3.4m, mv Hebridean Princess contributed £2.2m loss for the period to 31 October 2009. It would be impracticable to ascertain the profitability for the full financial year as the acquired business operated as a part of a company where costs were not allocated to business units and was not accounted for under IFRS.
12. Notes to the cash flow statement
|
2009 £'000 |
2008 £'000 |
|
|
Profit for the financial year |
2,707 |
8,814 |
|
Adjustments for: |
||
|
Investment revenues |
(1,438) |
(1,681) |
|
Rental income |
(29) |
(34) |
|
Finance costs |
1,373 |
228 |
|
Income tax (credit)/expense |
(66) |
238 |
|
Depreciation of property, ships, plant and equipment |
1,290 |
907 |
|
Depreciation of investment property |
4 |
4 |
|
Impairment of property, ship, plant and equipment |
96 |
- |
|
Amortisation of intangible assets |
363 |
270 |
|
Excess of acquirer's interest in fair value of identifiable net assets acquired over cost of acquisition |
(3,376) |
- |
|
Unrealised foreign exchange loss/(gain) on inter-company balances |
53 |
(725) |
|
Foreign exchange gain on bank balances |
(155) |
(1,200) |
|
Share option scheme |
52 |
- |
|
Movement in fair value of derivatives |
687 |
(4,199) |
|
Increase/(decrease) in provisions |
135 |
(209) |
|
Operating cash flows before movements in working capital |
1,696 |
2,413 |
|
Decrease in inventories |
202 |
162 |
|
Decrease/(increase) in receivables |
251 |
(2,511) |
|
Increase in payables |
81 |
5,543 |
|
Cash inflow generated from operations |
2,230 |
5,607 |
|
Income taxes paid |
25 |
(57) |
|
Net cash inflow from operating activities |
2,255 |
5,550 |
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other related parties are disclosed below:
Trading transactions
During the year, Group companies entered into the following transactions with related parties who are not members of the Group:
|
Amounts owed to |
||||
|
Purchase of services |
related parties |
|||
|
Years ended 31 October |
At 31 October |
|||
|
2009 £ |
2008 £ |
2009 £ |
2008 £ |
|
|
Roger Allard Limited |
174,276 |
170,896 |
29,261 |
14,100 |
|
PB Consultancy Services Limited |
54,155 |
65,510 |
3,776 |
6,162 |
Roger Allard Limited is a company owned and controlled by Mr R J Allard a director of the Company and majority shareholder of the Group and the payments made are for consultancy services. During the period Mr R.J. Allard, Director and Executive Chairman, lent the Group a short term interest free loan of £2,165,000. The loan was fully repaid on 18 May 2009.
PB Consultancy services is owned and controlled by Mr P E Buckley the Company Secretary of the Group and the payments are for consultancy, accounting and Company Secretarial services.
14. Principal risks and uncertainties
Principal risks and uncertainties
The Directors continually identify, evaluate and manage material risks and uncertainties faced by the Group which could adversely affect the Group's business, operating results and financial position. The list below details what the Directors consider to be the principal risks and uncertainties and the actions taken, or to be taken, to mitigate the adverse consequences. This list is not intended to be exhaustive and other risks may emerge over time:
|
Area |
Description of risk |
Examples of mitigating activities |
|
Economic |
The Group is competing for a share of disposable income of its target customers, making revenue vulnerable to the impact of an economic downturn. Volatility in markets such as currency and fuel can undermine budgets. |
The Group invests in brand awareness and pays significant attention to customer feedback in order to maximise brand loyalty. The Group has maintained its successful currency and fuel hedging policies as part of its financial planning. |
|
Geopolitics |
The Group is at risk of geo-political events or natural disasters affecting our business. |
The Group maintains a flexible business model, plans its itineraries with care and offers a broad geographic spread of destinations within its products. |
|
Regulation |
Changes to legislation (principally regarding the operation of cruise shipping) could result in the Group's vessels (mv Discovery, mv Minerva and mv Hebridean Princess) becoming uneconomic or inoperable. mv Discovery and mv Hebridean Princess are owned and this could further impact the carrying value of these significant assets. |
The Group closely monitors regulatory developments across the travel industry through its active membership of industry bodies and the Directors' significant contacts and experience in the travel industry. The Group manages cash levels carefully in order to meet any unexpected operational expenditure that may arise. The Group continually reviews the operating assets to plan any replacements and the timing of replacement. |
|
Operational |
The Group's ships carry a risk of operational failure and/or causing environmental damage thus impacting revenues and/or costs. The Group outsources a significant element of its operations (namely hotel services and deck and engine maintenance) to third parties. Any damage to these relationships could have a detrimental impact on our business. The Group is dependent on information technology systems, the failure of which would impact its ability to process sales. |
All ships operated by the Group are maintained according to the required maritime standards, including two dry dock inspections every five years. The Executive Directors meet regularly with the Group's key suppliers in order to maintain good working relationships. Investment in technology ensures that system reliability is optimised and procedures are in place to minimise the time that any selling system is inoperable. |
|
Competition |
The Group operates in a highly competitive market resulting in the threat of our competitors launching new products or adding products before we make corresponding updates and developments to our own range. This could render our products out-of-date and could result in rapid loss of market share. |
We undertake market research to ensure that our own products continue to meet the needs of our customers and we plan new product development with care to ensure that we have products that remain focused on our niche market. |
|
Financial |
A significant proportion of the Group's cost base remains constant notwithstanding changes to the level of revenues. |
Key performance indicators (as set out in the Chief Executive's Report) are closely monitored to ensure that yields are optimised. |
| The group has significant cash balances and is therefore exposed to interest rate risk. |
The group holds significant cash balances on fixed rate deposits and subsequent to the year end has reduced its cash balances through the acquisition of a new ship. |
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ALLG.L