20th Sep 2005 07:03
Regent Inns PLC20 September 2005 PRESS RELEASE Regent Inns PLC Preliminary results for the 52 week period ending 2 July 2005 Regent Inns PLC ("Regent" or "the Company"), the operator of late-night,entertainment-led bars, today announces headline results. The Company is reporting the results of its ongoing operations separately fromits discontinued operations which comprise its unbranded pubs of which therewere nine at the start of the year. Ongoing operations: • Turnover up by 7% to £131.3m (2004: £122.7m) • Like-for-like sales increase for branded operations of 2% (2004: 5.4% decline) • EBITDA before exceptional items of £26.7m (2004: £27.0m) • Operating profit before exceptional items and goodwill amortisation of £17.0m (2004: £18.3m) up 5.5% in the second half following 16.6% decline in the first half • Profit before tax, before exceptional items and goodwill amortisation £11.3m (2004: £12.3m) Total Company: • Turnover up 4.4% to £134.2m (2004: £128.5m) • Operating profit £11.2m (2004: loss £0.6m) • Profit on ordinary activities after taxation £4.9m (2004: loss of £7.6m) • Strong cash generation (excluding exceptional items of £26.6m) up 12% (2004: £23.7m) • Exceptional items of £4.3m relating to the renegotiation of bank facilities, reorganisation of the business and a write-off of abortive site acquisition costs, as announced at the interims • Net bank debt reduced by £12.6m to £58.5m • Basic earnings per share before goodwill amortisation and exceptional items up 5.6% to 7.6p (2004: 7.2p) • No final dividend as focus on reducing net debt Corporate progress: • Agreement of five year replacement debt facilities of £100m with four leading banks on 5 September 2005; significantly improved and longer-term banking terms and flexibility to participate in market consolidation • Reduction in central overhead which will result in full year savings of £1.5m • Appointment of Alan Jackson and Jim Glover as Non-Executive Directors in January and April 2005 respectively and David Turner, Operations Director, and Simon Kaye, Commercial Director, to the Board in February 2005 • Of the 9 unbranded pubs for disposal, 3 were sold in the year, 1 has been sold subsequently and 3 are under offer Commenting, Bob Ivell, Executive Chairman of Regent, said: "I am pleased to report financial results for the year ended 2 July 2005; a yearof significant transition during which the Group's financial and operatingperformance has improved considerably. "The Group's financial position has been strengthened significantly from a yearago. Walkabout, Jongleurs and Bar Risa are solid brands with inherent and uniquestrengths and are good cash generators. The underlying performance of thebrands, particularly Walkabout, has been substantially improved. Greaterpriority will be given to Jongleurs/Bar Risa in the coming months as weundertake a review of these businesses. "We believe that Regent now has a firm platform from which to pursue marketconsolidation opportunities and that such a strategy offers faster and strongergrowth prospects." - Ends - Enquiries: Regent Inns PLC 020 8375 3000Bob Ivell, Executive Chairman (for press)John Leslie, Chief Financial Officer (for analysts) Merlin 020 7653 6620Vanessa Maydon 07802 961 902 (mobile)Rebecca Penney 07795 108 178 (mobile) Photography: High resolution images are available for the media to view anddownload free of charge from www.vismedia.co.uk Attached: Chairman's Statement Financial Review Group P&L, Balance Sheet, Cash Flow Statement Reconciliation of movement in shareholders' funds Notes to the Accounts CHAIRMAN'S STATEMENT Summary I am pleased to report the results for the 52 weeks ended 2 July 2005. Thisproved to be a year of significant transition during which the Group's financialand operating performance improved considerably. Since the appointment of John Leslie and myself to the Board in October 2004,the major achievements during the year include:- A return to sustainable growth in the branded estate, evidenced by a like-for-like sales increase over the year of 2.0%- A reduction in central overhead costs which will result in full year savings of £1.5m- The securing of revised bank facilities of £100m- A reduction in net debt of £12.6m- Significant changes to the composition of the Board- Building the confidence of investors as shown by the share price recovery from its low point of 30 pence in October 2004. The Board and management of the Company are now focused on delivering value forshareholders. I am confident that we now have a business that can deliversustained growth, both organically and through acquisitions. Review of the year Like-for-like sales in our branded estate increased by 2.0% during the year - asignificant turnaround on the previous year when like-for-like sales declined by5.4%. Sales grew steadily in the first half and the growth rate was sustainedthrough the second half. This strong performance was achieved in spite of a morechallenging retail environment. Walkabout, the largest part of our branded estate, performed particularly wellin the second half of the year with like-for-like sales up 4.6% despite strongJune comparatives from Euro 2004 football. Excluding June, like-for-like salesgrowth for Walkabout in the second half was 7.3%. Operating profit before exceptional items and goodwill amortisation from ongoingoperations was £17.0m (2004: £18.3m) This reduction for the year disguises asignificant improvement in the second half of the year (5.5% up on the period)compared with the first half (16.6% down). The restructuring of the central costbase was completed during the second half and is expected to deliver full yearsavings of £1.5m, £0.5m of which were in the second half of 2005. Results Ongoing operationsSales from ongoing operations increased by 7.0% to £131.2m (2004: £122.7m).Operating profit from ongoing operations was £12.2m (2004: £0.7m). After addingback exceptional items and goodwill, operating profit was £17.0m (2004: £18.3m).Profit before tax calculated on the same basis was £11.3m (2004: £12.3m). Pre-exceptional earnings before interest, tax, depreciation and goodwillamortisation (EBITDA) was £26.7m (2004: £27.0m). The half-year comparisons set out below illustrate the turnaround in performanceduring the year: First half Second half ------------ ------------- 2005 2004 2005 2004 £m £m £m £mOngoing operations:Operating profit before exceptionals 8.9 10.6 8.1 7.7and goodwill amortisationProfit before tax before exceptionals 5.9 7.7 5.4 4.6and goodwill amortisationEBITDA 13.7 14.9 13.0 12.1 Total operationsTotal Group sales were £134.2m (2004: £128.5m). Operating profit beforeexceptional items and goodwill amortisation was £15.9m (2004: £17.0m) and profitbefore tax on the same basis was £10.2m (2004: £11.0m). As reported in the Interim results, exceptional charges of £4.3m were incurredduring the first half. These related to the renegotiation of bank facilities,the reorganisation of the business including severance payments to formerdirectors, and writing off aborted site acquisition costs following the decisionto discontinue the development programme. There were no exceptional items in thesecond half. After exceptional charges and goodwill amortisation, profit before tax was £4.9m(2004: loss of £7.6m). The effective tax rate was slightly lower than last yearat 33.3% (2004: 33.5%) resulting in basic earnings per share of 4.4 pence (2004:loss of 7.4 pence). Basic earnings per share excluding exceptional items andgoodwill amortisation was 5.6% higher than last year at 7.6 pence (2004: 7.2pence). Given the curtailment of the development programme and the immediate priority ofreducing underlying debt, capital expenditure was restricted to maintenance ofthe existing estate and amounted to £8.6m (2004: £28.6m), including £1.1m inrespect of completion payments for projects undertaken in the previous year. Strong cash generation enabled us to reduce net bank debt by £12.6m to £58.5m atthe balance sheet date and net bank gearing to 90% (2004: 118%). Discussions with banks When the covenant default was discovered in September 2004, the immediatepriority was to reach agreement on new terms with the existing bankingsyndicate. An independent accountant's review of the business on behalf of thebanks confirmed the absence of unexpected liabilities and in December 2004 thebanking syndicate agreed to continue to provide reduced debt facilities untilMarch 2006 with an option to extend for a further 12 months, subject to certainconsiderations. Since then, the Group's robust trading performance and cash generation hasstrengthened the balance sheet resulting in significant improvements in covenantratios. We are pleased to report that, on 5 September 2005, five-yearreplacement debt facilities of £100m were agreed with four leading banks onsignificantly improved terms. At current levels of net debt to EBITDA, thelending margin reduces to 100 base points, which represents a significant costreduction. More importantly, these debt facilities are longer term and providethe Group with the flexibility to take advantage of market consolidationopportunities. Dividend The Board has decided not to recommend a dividend as it believes there are anumber of opportunities, including reducing debt, which will create betterreturns for shareholders. Board changes I was delighted to be appointed Executive Chairman in October 2004, along withJohn Leslie who joined as Chief Financial Officer. Since then several furtherchanges have been made to the Board. Nigel Potter, Non-Executive Director, and Peter Savage, Non-Executive Chairmanstepped down in December 2004 and January 2005 respectively. I would like tothank them for all their efforts. In their place I was pleased to welcome AlanJackson and Jim Glover as Non-Executive Directors in January 2005 and April 2005respectively. In February 2005, David Turner, Operations Director, and Simon Kaye, CommercialDirector, were appointed to the Board. Both had served on the Executive Board ofRegent since 2001. I believe that our Board now has an excellent combination of individuals withsignificant licensed retail experience and the expertise to drive the Groupforward. Industry issues The licensed retail sector currently is going through a period of significantchange with a number of regulatory initiatives about to take effect along withseveral environmental and social issues under consultation. As a reputable operator, Regent recognises the importance of responding topublic concerns around responsible drinking and continues to work with allparties involved to find ways of addressing issues in the on-trade. Regent hasone of the best operator records in the industry in relation to socialresponsibility and enjoys an excellent relationship with the Police,co-operating with them on a UK-wide basis to actively address any concerns. This pro-active approach to building strong relationships with the Police andthe Local Authorities has facilitated the successful transfer of existinglicences, with only one currently awaiting approval. Later trading hours havebeen granted at 17 venues coupled with a large number of helpful variations allof which will become effective from the commencement of the new licensing regimein November this year. Operational review Overall, trading throughout the year has responded well to initiatives in thebusiness with monthly like-for-like sales consistently above last year, with theexception of June which was competing against the strong comparative resultingfrom the Euro 2004 football tournament. Walkabout was the immediate focus of the new senior management team in October2004 and we are pleased to report that, the trading performance of the estatehas improved significantly during the year. A thorough review of product range and pricing policy in Walkabout wasundertaken, as well as the use of promotional offers, entertainment and customerservice and facilities. A selection of premium brands, such as Budweiser,Smirnoff Ice and Red Bull, were introduced along with basket offerings ofsensible but competitively priced drinks during off-peak periods. Promotionalevents have been used to attract new customers and to reinforce Walkabout incustomers' minds as a dynamic destination for both sporting events and latenight entertainment. During the year, Walkabout benefited from a number of one-off events includingWales' success in the Six Nations Rugby with sales at Cardiff exceeding £100,000on the days when Wales hosted matches against England and Ireland, and Liverpool's success in the Champions League. The sporting calendar continues to underpinmuch of Walkabout's activity and we expect to benefit further from customers'continued enthusiasm for experiencing the atmosphere of major sporting events inour venues together with our ability to offer Sky screenings, the increased costof which many smaller bars are now unable to justify. Jongleurs Comedy Clubs, which celebrated its 21st birthday during the year,remains a unique and successful format across the UK. Whilst the JongleursComedy Clubs have traded well during the year, a small number of the adjoiningBar Risa feeder bars have performed less well. These venues had previouslyachieved exceptional sales levels since opening and subsequently have beensubject to intense local competition. A comprehensive review of the Bar Risabusiness is being undertaken and we are confident that this will deliverimproved trading, as was the case following the review of the Walkabout estate. Gross margin across the estate was stable through the year. The improved productrange, together with selective promotional activity has resulted in margins thatare now at a sustainable level. During the year, the Group faced a number of increased cost pressures. On alike-for-like basis, branch labour costs were put under pressure mainly due tothe increase in the minimum wage and our desire to maintain pay differentialsfor those earning above the minimum wage threshold. Charges from Sky for sportsscreening, which is an important element of the Walkabout offering, increasedsubstantially ahead of inflation. We have invested more in publicity to drivethe business forward and in repairs to deal with some of the backlog of items,particularly where these related to customer facilities. A number of initiatives were implemented during the year to improve overallbusiness efficiency and performance. In particular, the central support functionwas restructured to reflect the size of operations and reduced expansion plansfor the existing brands. In February 2005, 27 redundancies across head officefunctions and operational management were announced, all of which wereimplemented by the end of the financial year. A review of financial controls and reporting was undertaken and an internalaudit department created, principally responsible for all stocktaking, which hadpreviously been outsourced. We believe that these changes should enable us todeliver margin improvement. We have undertaken a review of our food offerings and recently launched newmenus more appropriate to the Walkabout and Jongleurs brands, which shouldenhance both sales and margin. Walkabout's menu range has been simplified,focusing on good quality value offerings that are easy to prepare and thereforeensure quality of delivery. At Jongleurs, we have placed more emphasis on fingerfood options to enable us to better service customers during the short breaksavailable for serving food. Like-for-like food sales grew by 6.7%. Capital expenditure We monitor site-by-site performance closely and allocate significant capitalexpenditure to ensure that high standards are maintained. A total of £8.6m wasinvested in the existing estate in the year including major refurbishments atWalkabouts in, Sheffield, Leeds and Lincoln and Jongleurs/Bar Risa at Cardiff.When we undertake major refurbishments we aim to enhance trading whereverpossible through capacity increases, licence extensions and facilityimprovements to ensure that investments achieve the best return. In the comingyear, major refurbishments are planned for Walkabouts in Wigan, Reading andSwansea and Jongleurs/Bar Risas in Southampton, Birmingham and Leeds, as well asworks to increase the capacity at Jongleurs Bristol. More than half of theestate will benefit from significant capital expenditure during the year. Disposal programme At the beginning of the year, nine unbranded venues remained within the disposalestate (58 venues identified for disposal in 2002). Of these, three were soldduring the year, one was sold after the year end, three are under offer, and twocontinue to be marketed. Walkabout Leicester and PALs Croydon were closed in September 2004 and May 2005respectively due to poor trading. The Leicester site is being marketed fordisposal and subsequent to the year end, the Croydon lease has been surrenderedto the landlord. Walkabout Shoe Lane in London, and Freedom, an unbranded venuein Soho, were sold in February 2005. People The year under review has been a challenging period for all our staff from acompany and industry perspective. During a period of change, it is especiallyimportant to have well-motivated teams throughout the business who areoperationally focused and dedicated to exceeding their customer expectations.There is no doubt that the dedication and hard work of staff has contributedconsiderably to the improvement in trading performance during the year and weare extremely grateful for their efforts, both at head office and in the venues. Strategy The Group's financial position has been significantly strengthened from a yearago. Walkabout, Jongleurs and Bar Risa are solid brands with inherent and uniquestrengths and are good cash generators. The underlying performance of thebrands, particularly Walkabout, has been substantially improved. Greaterpriority will now be given to Jongleurs/Bar Risa in the coming months as weundertake a thorough review of these businesses. We anticipate that there will be some opportunities to acquire new sites duringthe current financial year, however we will only compete for those that areexceptional in terms of location and competitor profile. We believe that Regentnow has a strong platform from which to pursue market consolidationopportunities and that such a strategy offers faster and stronger growthprospects. Current trading and prospects Like-for-like sales trends have continued to be positive in the current year.Overall, like-for-like sales in the branded estate are up 2.0% over the first 11weeks and we believe that there should be further improvement when we implementa number of initiatives across the business. The Board remains confident of theGroup's prospects as it focus on improvements to the existing estate and marketconsolidation opportunities. Bob IvellExecutive Chairman20 September 2005 FINANCIAL REVIEW Presentation of results The profit and loss account for the year under review is set out in separatecolumns showing the results of 'ongoing operations' and 'operations to bediscontinued'. This reporting format is consistent with the presentation in 2003and 2004 and follows on from the decision in 2002 to divest a significant numberof unbranded venues. Ongoing operations comprise our two chains of brandedvenues, Walkabout and Jongleurs together with five other non-branded venues.'Operations to be discontinued' comprises the remaining non-branded venues thatwere identified for disposal in 2002. The number of venues included in'operations to be discontinued' has declined year-on-year as follows: Number of venues in 'Operations to be discontinued' At start of year At end of year 2002 58 24 2003 24 19 2004 19 9 2005 9 6 Results Turnover from ongoing operations increased in the year ended 2 July 2005 by 7.0%to £131.3m (2004: £122.7m) Like-for-like sales in ongoing operations were up by1.8% on 2004 with branded like-for-like sales up by 2.0%. Excluding June, whensales growth was significantly impacted by the Euro 2004 comparatives,like-for-like sales in ongoing operations were up by 2.6%. This represented asteady growth trend through the year given our first half like-for-like salesincrease of 2.5%. Operating Profit before exceptionals and goodwill amortisation was £15.9m (2004:£17.0m) with Operating Profit from ongoing operations before exceptionals andgoodwill amortisation of £17.0m (2004: £18.3m). The reduction in profit wasprincipally due to lower gross margin following pricing adjustments and theintroduction of premium brands to drive sales growth. The Board believes thatthe current margin level is sustainable. Progress on the disposal of the venues comprising the operations to bediscontinued has slowed partly due to the tail of the estate being the mostdifficult to sell and also because most of these venues had previously beenplaced under the management of a third party. Towards the end of the year theseunits were taken back under the Group's operational management so as to betterfacilitate successful disposals. The Operating loss from 'operations to bediscontinued' reduced to £1.0m (2004 £1.3m). EBITDA before exceptional items from ongoing operations was £26.7m (2004:£27.0m). Total Group EBITDA before exceptional items was £25.6m (2004: £25.7m),which despite the significant changes during the year demonstrates the strongcash generation of the business. Interest The net interest charge reduced by £0.3m to £5.7m despite an increase in themargin from December 2004 when banking facilities were renegotiated followingthe discovery of a breach in covenants as referred to in the Chairman'sstatement. The average interest rate paid during the year on bank debt increasedfrom 7.47% to 7.75%. The reduction in the interest charge in 2005 largelyreflects the strong cash generative nature of the business which has reduced netbank debt from £71.1m to £58.5m over the course of the year. No interest costs were capitalised during the year (2004: £0.3m) The net interest charge is covered 4.8 times (2004: 4.5 times) by EBITDA beforeexceptional items. Fixed charge cover, representing the number of times interestplus rent costs is covered by EBITDA before exceptional items and before rentwas 2.1 times (2004: 2.1 times). Taxation The Group has a cash tax rate payable on profits of 13.3% (2004: 11.5%) which issignificantly below the UK corporation tax rate of 30% as a result of theaccelerated capital allowances available from the Group's historic developmentprogramme. The increase in rate from 2004 reflects the curtailment of thedevelopment programme and consequent lower capital expenditure. The cash tax rate is defined as the current tax charge on ongoing operations(excluding any adjustments in respect of prior periods) divided by profit beforetax on ongoing operations excluding goodwill amortisation and exceptional itemsfrom both elements of the calculation. The effective total tax rate on profits from ongoing operations beforeadjustments to both the current tax and deferred tax charges in respect of prioryears is 33.3% (2004: 33.5%). The difference between the effective tax rate andthe UK corporation rate is due to accounting charges that do not qualify for taxrelief, primarily depreciation charges relating to buildings. The differencebetween the cash tax rate and the effective tax rate is due to provision for taxdeferred in to future years that may become payable. The provision for deferredtaxation arises predominantly from capital allowances deducted in arriving attaxable profit being significantly greater than the depreciation charge used foraccounting purposes. The total provision for deferred taxation at the year-end is £16.8m (2004:£15.5m). Exceptional Items The Group incurred exceptional charges in the year of £4.3m. This comprised:- costs of renegotiating the bank debt facilities following the breach of covenant, including extensive due diligence work performed at the request of the banks, £1.9m- costs of reorganising the business £1.6m, including payments to former directors (£0.3m), with the balance representing severance payments to head office staff, and- write-off of aborted site acquisition costs £0.8m The business reorganisation was completed in the year and will generate annualsavings of £1.5m. The exceptional charges incurred in 2004 of £17.2m comprised a provision forimpairment against the carrying value of fixed assets of £14.4m and a provisionfor onerous leases of £2.8m made in accordance with FRS 12 - "Provisions,contingent liabilities and contingent assets". The associated tax credit on the exceptional items in the year was £1.2m (2004:£2.6m). Shareholder returns Earnings per share before goodwill amortisation and exceptional items increasedby 5.6% to 7.6p (2004: 7.2p). Earnings per share before goodwill amortisation and exceptional items fromongoing operations, calculated by allocating net interest payable entirely toongoing operations in both years, reduced by 8.8% to 8.3p (2004: 9.1p). The Board has not recommended a dividend in respect of the year because itbelieves, in the short term, there are a number of opportunities including therepayment of debt that will deliver better returns to shareholders throughenhanced share value (2004 total dividend payable 1.82p per share). Cash flow Net cash flow from operations (excluding the cash flow effects of exceptionalitems originating in both the year and previous years) was £26.6m (2004:£23.7m). Free cash flow (being cash from operations adjusted for net interest,corporation tax, reinvestment capital expenditure and exceptional items) was£12.4m (2004: £6.9m) representing 11.1p per share (2004: 6.7p). The Group received a net £2.8m repayment of tax in the year relating to the onaccount payments for 2003 (2004: payment of £0.7m). Expenditure on fixed assets of £8.6m was £20.0m lower than 2004 due to thecessation of the brand roll-out programme and related principally to assetreplacements and venue refurbishment. The capital spend of £8.6m compares to adepreciation charge in the year of £9.7m. Total proceeds from the sale of fixed assets amounted to £1.2m and relates tothe disposal of a number of unbranded sites and one Walkabout. Capital expenditure Total capital expenditure in the year of £8.6m (2004: £28.6m) included £1.1m ofcompletion payments for two major conversion projects undertaken at the end ofthe previous financial year (Bromley and Battersea), £1.4m for four fullrefurbishments of Walkabouts at Sheffield, Lincoln and Leeds, and the Jongleurs/Bar Risa at Cardiff, and £6.1m on maintenance capital expenditure. Reinvestmentcapital expenditure (total capital expenditure excluding new sites andconversions) of £7.5m (2004: £8.5m) represented 5.7% of sales in ongoingoperations (2004: 6.9% sales in ongoing operations) compared with depreciationof 7.4% of sales in ongoing operations (2004: 7.1% sales in ongoing operations). Funding Net debt decreased in the year by £12.6m to £64.5m, which includes £6.0m ofconvertible loan notes. Net bank gearing at the balance sheet date was 90%(2004: 118%). Net bank gearing before full provision for deferred tax was 72%(2004: 94%). On 5 September 2005, the Company entered into new debt arrangements with fourmajor lending banks. The revised five year facility totals £100m, comprising a£60m revolving credit facility, and a £40m term loan, repayable in annualtranches of £3m and a final repayment of £28m in August 2010. This replaces afacility that at the balance sheet date totalled £78.2m funded by a syndicate ofeight banks, and was due to expire in March 2006. This new facility provides the Group with considerably more flexibility. Atcurrent levels of net debt to EBITDA, it has also resulted in a 50% reduction inthe margin over LIBOR that the company will pay. In line with normal practice,the costs of establishing this new facility (£1.0)m will be amortised over aperiod of four years (one year less than the full term). Because the previous facility had less than one year to its expiry at thebalance sheet date, all bank borrowings of £63.2m are classified as creditorsfalling due within one year. However, under the new facility, only £3m is duefor repayment within 12 months of the balance sheet date. Treasury Policy The Group's treasury policy is to ensure the availability of funds to meet itsfuture requirements and to minimise exposure to fluctuations in interest rates.The Board monitors and approves treasury policy and approves all interest ratehedging transactions. To manage the Group's exposure to fluctuations in interest rates, the majorityof borrowings are hedged using interest rate swaps. At the balance sheet date,the Group had in place £62m of interest rate swap agreements covering 98% ofbank debt, fixing interest at an average rate of 5.75% (excluding borrowingmargin). £50m of these swaps expire in July 2006 and the remaining £12m expirein September 2007. The Group maintains business and cash flow models that forecast cashrequirements in the short, medium and long term. These forecasts are reviewedregularly by the Board. AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT for the 52 weeks ended 2 July 2005 Continuing operations Note Ongoing Operations 52 weeks 52 weeks operations to be ended ended discontinued £'000 £'000 2 July 2005 3 July 2004 Total Total £'000 £'000 Turnover 2 131,272 2,975 134,247 128,528 Operating costs(including exceptionalsand goodwillamortisation) 3 (119,028) (4,015) (123,043) (129,097)--------------------------------------------------------------------------------------Operating profit beforeexceptionals andgoodwill 16,966 (1,040) 15,926 17,036amortisationExceptional items 4 (4,291) - (4,291) (17,174) Goodwill amortisation (431) - (431) (431)-------------------------------------------------------------------------------------- Operating profit/(loss) 12,244 (1,040) 11,204 (569) Profit/(loss) on salesof fixed assets 57 (160) (103) --------------------------------------------------------------------------------------- Profit/(loss) onordinaryactivities before 12,301 (1,200) 11,101 (569)interest and taxationNet interest payable 5 (5,703) - (5,703) (6,006)---------------------------------------------------------------------------------------- Profit/(loss)on ordinaryactivities beforetaxation 6 6,598 (1,200) 5,398 (6,575)Taxation 7 (832) 312 (520) (1,021)--------------------------------------------------------------------------------------- Profit/(loss) onordinary 5,766 (888) 4,878 (7,596)activities aftertaxationDividends 8 - - - (2,044)----------------------------------------------------------------------------------------Retained profit/(loss) 5,766 (888) 4,878 (9,640)for the period---------------------------------------------------------------------------------------- Earnings per sharebeforegoodwill amortisation 9 7.6p 7.2pandexceptional items- basic ------------------------- diluted 9 7.6p 7.2p ------------------------ Earnings/(loss) per 9 4.4p (7.4)pshare - basic ------------------------- diluted 9 4.3p (7.4)p ------------------------ AUDITED CONSOLIDATED BALANCE SHEETat 2 July 2005 2 July 2005 3 July 2004 Note £'000 £'000Fixed assetsIntangible assets 6,499 6,930Tangible assets 10 153,721 156,796 -------------------------------------------------------------------------------- 160,220 163,726 Current assetsAssets for sale 210 460Stock 1,548 2,025Debtors 11 5,772 7,390Cash at bank and in hand 4,654 --------------------------------------------------------------------------------- 12,184 9,875 Creditors: amounts falling due within one 12 (81,255) (88,507)year -------------------------------------------------------------------------------- Net current liabilities (69,071) (78,632)-------------------------------------------------------------------------------- Total assets less current liabilities 91,149 85,094 Creditors: amounts falling due after more than one year (including convertible debt) 13 (6,000) (6,000)Provision for liabilities and charges 14 (20,091) (19,053)--------------------------------------------------------------------------------Net assets 65,058 60,041-------------------------------------------------------------------------------- Capital and reservesCalled up share capital 5,625 5,615Share premium account 50,080 49,951Capital reserve - own shares (322) (322)Profit and loss account 9,675 4,797-------------------------------------------------------------------------------- Equity shareholders' funds 65,058 60,041-------------------------------------------------------------------------------- Approved by the Board of Directors on 19September 2005 and signed on its behalf by:John LeslieDirector AUDITED CONSOLIDATED CASH FLOW STATEMENTfor the 52 weeks ended 2 July 2005 52 weeks 52 weeks ended ended 2 July 2005 3 July 2004 Note £'000 £'000 Operating cashflows excluding the effects ofexceptional items 26,645 23,748 Cash outflows resulting from exceptional (3,981) (1,801)items -------------------------------------------------------------------------------- Net cash inflow from operating activities 15 22,664 21,947 Returns on investments and servicing offinanceInterest received 306 79Interest paid (5,836) (6,008)-------------------------------------------------------------------------------- (5,530) (5,929)--------------------------------------------------------------------------------TaxationCorporation tax received/(paid) 2,792 (653)-------------------------------------------------------------------------------- Capital expenditure and financialinvestmentPurchase of tangible fixed assets (8,642) (28,609)Sale of tangible fixed assets 1,168 5,538-------------------------------------------------------------------------------- (7,474) (23,071)-------------------------------------------------------------------------------- DividendsDividends paid - (5,089)-------------------------------------------------------------------------------- Net cash inflow/(outflow) before financing 12,452 (12,795) FinancingRepayment of bank loans (7,100) (1,226)Loan notes due within one year - (3,492)Net proceeds from issue of shares 139 16,695Purchase of own shares - (27)--------------------------------------------------------------------------------Net cash (outflow)/inflow from financing (6,961) 11,950--------------------------------------------------------------------------------Increase/(decrease) in cash 16 5,491 (845)-------------------------------------------------------------------------------- AUDITED reconciliation of movements in shareholders' funds For the 52 weeks ended 2 July 2005 52 weeks 52 weeks ended ended 2 July 3 July 2005 2004 £'000 £'000 Profit/(loss) attributable to shareholders' for thefinancial period 4,878 (7,596) Dividends - (2,044)-------------------------------------------------------------------------------- 4,878 (9,640) New share capital subscribed 139 16,695 Purchase of own shares - (27) UITF 17 charge on investment in own shares - (30)-------------------------------------------------------------------------------- Net addition to shareholders' funds 5,017 6,998 Opening shareholders' funds as previously reported 60,041 53,043-------------------------------------------------------------------------------- Closing shareholders' funds 65,058 60,041-------------------------------------------------------------------------------- Audited consolidated statement of total recognised gains and losses for the 52 weeks ended 2 July 2005 52 weeks 52 weeks ended ended 2 July 2005 3 July 2004 £'000 £'000 Profit/(loss) for the financial year 4,878 (9,640)-------------------------------------------------------------------------------- Total recognised gains and (losses) for thefinancial period 4,878 (9,640)Prior year adjustment - 52------------------------------------------ -------------------------------------Total gains and (losses) recognised since lastfinancial statements 4,878 (9,588)-------------------------------------------------------------------------------- NOTES for the 52 weeks ended 2 July 2005 1. Basis of preparation These preliminary statements do not constitute statutory accounts within themeaning of section 240 of the Companies Act 1985. The financial information forthe 52 weeks ended 2 July 2005 is extracted from the statutory accounts for thesame period. PricewaterhouseCoopers LLP, the Company's new auditors, reported onthose accounts; their report was unqualified. The financial information for the 52 weeks ended 3 July 2004 is extracted fromthe statutory accounts for that period, which have been delivered to theRegistrar of Companies. Ernst & Young LLP, the Company's auditors in 2004,reported on those accounts; their report was unqualified but contained amodification on the grounds of a fundamental uncertainty over going concern. The financial statements have been prepared on the basis of the accountingpolicies set out in the Company's 2004 statutory accounts. The statutoryaccounts for the 52 weeks ended 2 July 2005 will be delivered to the Registrarof Companies following the Company's Annual General Meeting. 2. Turnover All turnover arises in the UK. Continuing operations Ongoing Operations 52 weeks ended 52 weeks ended operations to be 2 July 2005 3 July 2004 discontinued Total Total £'000 £000 £'000 £'000 Licensed retailing 131,272 1,620 132,892 126,736 Rental income - 1,355 1,355 1,792 --------------------------------------------------------------------------------------- 131,272 2,975 134,247 128,528 --------------------------------------------------------------------------------------- Turnover from operations to be discontinued relates to the non-branded venuesthat were identified for disposal in 2002. 3. Net Operating Costs Continuing operations Ongoing Operations 52 weeks ended 52 weeks ended operations to be 2 July 2005 3 July 2004 discontinued Total Total £'000 £000 £'000 £'000 Cost of sales - licensed retailing (30,687) (642) (31,329) (28,831) Cost of sub-let properties - (1,355) (1,355) (1,792) Administration costs Operating expenses (66,505) (2,018) (68,523) (64,835) Depreciation (9,703) - (9,703) (8,652) Goodwill amortisation (431) - (431) (431) Exceptional items (4,291) - (4,291) (17,174) Head office expenses (7,436) - (7,436) (7,601) Other operating income 25 - 25 219 --------------------------------------------------------------------------------- (119,028) (4,015) (123,043) (129,097) --------------------------------------------------------------------------------- Gross profit 100,585 978 101,563 97,905 --------------------------------------------------------------------------------- 4. Exceptional items 52 weeks 52 weeks ended ended 2 July 2005 3 July 2004 £'000 £'000 Renegotiation of bank debt facilities (1,853) - Reorganisation costs (1,617) - Aborted site acquisition costs (821) - Provision for impairment of tangible fixed assets - (14,374) Provision for onerous leases - (2,800)-------------------------------------------------------------------------------- (4,291) (17,174)-------------------------------------------------------------------------------- The provision for impairment of tangible fixed assets made in 2004 wascalculated in accordance with FRS 11 'Impairment of Fixed Assets and Goodwill'by comparing the book values of the sites with their recoverable amount,represented by their value in use to the Company. Value in use was derived fromdiscounted cashflow projections using a nominal discount rate of 7.5% on apre-tax basis. 5. Net Interest Payable 52 weeks 52 weeks ended ended 2 July 2005 3 July 2004 £'000 £'000Interest payableBank overdraft 114 130Loan notes 409 550Bank loans 5,329 5,690-------------------------------------------------------------------------------- 5,852 6,370Interest capitalised - (285)-------------------------------------------------------------------------------- Interest receivable (149) (79)-------------------------------------------------------------------------------- 5,703 6,006-------------------------------------------------------------------------------- 6. Profit/(loss) on Ordinary Activities before Taxation 52 weeks 52 weeks ended ended 2 July 2005 3 July 2004 £'000 £'000Profit/(loss) on ordinary activities beforetaxation is stated after charging: Depreciation 9,703 8,652Amortisation of goodwill 431 431Auditor's remuneration: audit services 60 80Auditor's remuneration: other services - 69Repairs and renewals 3,047 2,570Operating lease rentals: land and buildings 12,300 12,019Operating lease rentals: equipment and vehicles 172 231Pre-opening costs 73 767-------------------------------------------------------------------------------- 7. TaxationAnalysis of tax charge in the period The charge based on the profit/(loss) for the period comprises: Continuing operations Ongoing Operations 52 weeks ended 52 weeks operations to be 2 July 2005 ended discontinued Total 3 July 2004 Total £'000 £'000 £'000 £'000UK corporation tax:On profit/(loss) forthe 340 (312) 28 415periodAdjustment in respectof prior periods (777) - (777) (842)--------------------------------------------------------------------------------Total current tax (437) (312) (749) (427)--------------------------------------------------------------------------------UK deferred tax:Origination andreversal of 2,257 - 2,257 747timing differencesChanges in recoverableamounts of deferred tax assets (1) - (1) (613)Adjustment in respectof prior years accelerated capital allowances (987) - (987) (819) Prior year adjustmentto reflect capital gains - - - 2,133--------------------------------------------------------------------------------Total deferred tax 1,269 - 1,269 1,448-------------------------------------------------------------------------------- Tax on profit/(loss)on ordinary activities 832 (312) 520 1,021ordinary activities -------------------------------------------------------------------------------- 8. Dividends 52 weeks 52 weeks ended ended 3 July 2004 2 July 2005 £'000 £'000 Nil p per share (2004 - 1.82p) interim paid - 2,044 Nil p per share (2004 - Nil p) final proposed - --------------------------------------------------------------------------------- - 2,044-------------------------------------------------------------------------------- Dividends amounting to £nil (2004: £2,297) in respect of the company's sharesheld by the Employee Share Ownership Trust (ESOT) have been deducted in arrivingat the aggregate of dividends paid. 9. Earnings/(loss) per shareEarnings per share have been calculated using the weighted average number ofshares in issue during the relevant financial years excluding those held in theESOT which are treated as cancelled. The weighted average number of shares inissues is 111,804,349 (2004: 102,744,781) and the earnings, being profit onordinary activities after taxation, are £4,878,000 (2004: loss £7,596,000). Diluted earnings per share have been calculated using the weighted averagenumber of shares in issue diluted for the effect of share options andconvertible unsecured loan stock, where the option price or conversion rate hasa diluting effect. The diluted weighted average number of shares is 112,631,758(2004: 103,408,364). Earnings per share before goodwill amortisation and exceptional items is alsoshown as the Directors believe that this is a better measurement of thecompany's underlying performance over time. Earnings per share before goodwill amortisation and exceptional items excludesloss on sales of fixed assets of £103,000 (2004: £nil) together with a taxationcharge thereon of £3,000 (2004: £nil), goodwill amortisation of £431,000 (2004:£431,000) and other exceptional charges of £4,291,000 (2004: £17,174,000)together with a taxation credit thereon of £1,167,000 (2004: £2,580,000). 10. Tangible Assets 2 July 2005 3 July 2004 £'000 £'000 Opening book value 156,796 154,292Additions 7,762 28,357Depreciation (9,703) (8,652)Provision for impairment - (14,374)Disposals (1,134) (2,827) -------------------------------- Closing book value 153,721 156,796 -------------------------------- 11. Debtors Group Company 2 July 2005 3 July 2004 2 July 2005 3 July 2004 £'000 £'000 £'000 £'000 Amounts falling duewithin one yearTrade debtors 993 716 993 716Corporation tax - 1,600 - 1,383Amounts owed bysubsidiaryundertakings - - 583 583Other debtors 315 549 279 516Prepayments andaccrued income 4,464 4,525 4,464 4,525-------------------------------------------------------------------------------- 5,772 7,390 6,319 7,723-------------------------------------------------------------------------------- 12. Creditors - amounts falling due within one year Group Company 2 July 2005 3 July 2004 2 July 2005 3 July 2004 £'000 £'000 £'000 £'000 Bank loans 63,196 70,296 63,196 70,296Bank overdrafts - 837 - 856Trade creditors 4,711 5,318 4,711 5,318Amounts owed tosubsidiaryundertakings - - 11,371 11,626Corporation tax 443 - 660 -Tax and socialsecurity 2,264 1,302 2,264 1,302Accruals and deferredincome 9,382 8,820 9,382 8,820Other creditors 1,259 1,934 1,213 1,890-------------------------------------------------------------------------------- 81,255 88,507 92,797 100,108-------------------------------------------------------------------------------- Bank loans are shown as falling due within one year as the facility in place atthe Balance Sheet date was due to expire in March 2006. However, as explained in the Funding section of the Finance Review, the loans were refinanced on 5 September 2005 by a new 5 year facility. Under this new facility,£3,000,000 ofthe outstanding loans fall due for repyament within one year of the balance sheet date. 13. Creditors - amounts falling due after more than one year Group Company 2 July 2005 3 July 2004 2 July 2005 3 July 2004 £'000 £'000 £'000 £'000 Jongleurs unsecuredconvertible loan notes 6,000 6,000 6,000 6,000-------------------------------------------------------------------------------- 6,000 6,000 6,000 6,000-------------------------------------------------------------------------------- The Jongleurs unsecured convertible loan notes were issued to finance theacquisition of the Jongleurs businesses on 7 August 2000. Interest is payable at5.6% per annum. The loan notes can be converted into Regent Inns plc ordinaryshares at a price of 153p per share at any time at the option of the holder.Loan stock not converted will be redeemed at par on 30 November 2007. 14. Provisions for Liabilities and Charges Onerous leases Deferred Total taxation £'000 £'000 £'000Group Cost:At 3 July 2004 3,523 15,530 19,053Arising during the year - 1,269 1,269Utilised (231) - (231)-------------------------------------------------------------------------------- At 2 July 2005 3,292 16,799 20,091------------------------------------------------------------------------------- Onerous leases Deferred Total taxation £'000 £'000 £'000Company Cost:At 3 July 2004 3,523 15,561 19,084Arising during the year - 1,269 1,269Utilised (231) - (231)-------------------------------------------------------------------------------- At 2 July 2005 3,292 16,830 20,122-------------------------------------------------------------------------------- 15. Reconciliation of Operating Profit to Operating Cash Flows 52 weeks ended 52 weeks ended 2 July 2005 3 July 2004 £'000 £'000 Operatingprofit/(loss) 11,204 (569)Non-cash exceptionalitems (note 4) 821 17,174Cash exceptionalitems 3,351 -Depreciation 9,703 8,652Amortisation ofgoodwill 431 431Decrease/(increase)in stocks 477 (593)Decrease/(increase)in debtors 18 (845)Increase/(decrease)in creditors 640 (502)-------------------------------------------------------------------------------- Operating cashflowsexcluding theeffects of exceptional items 26,645 23,748Cashflows resultingfrom exceptional items (3,981) (1,801)--------------------------------------------------------------------------------Net cash inflow fromoperating activities 22,664 21,947-------------------------------------------------------------------------------- 16. Reconciliation of Net Cash Flow to Movement in Net Debt 52 weeks ended 52 weeks ended 2 July 2005 3 July 2004 £'000 £'000 Increase/(decrease)in cash in the year 5,491 (845)Repayment of longterm loans 7,100 1,226Loan notes duewithin one year - 3,492-------------------------------------------------------------------------------- Change in net debtresulting from cashflows 12,591 3,873Net debt atbeginning of year (77,133) (81,006)-------------------------------------------------------------------------------- Net debt at end of year (64,542) (77,133)-------------------------------------------------------------------------------- 17. Analysis of Net Debt 3 July 2004 Cash flows 2 July 2005 £'000 £'000 £'000 Cash at bank and in hand - 4,654 4,654Bank overdraft (837) 837 --------------------------------------------------------------------------------- (837) 5,491 4,654-------------------------------------------------------------------------------- Borrowings due within one year (70,296) 7,100 (63,196)Loan notes due after one year (6,000) - (6,000)-------------------------------------------------------------------------------- (76,296) 7,100 (69,196)-------------------------------------------------------------------------------- Total (77,133) 12,591 (64,542)-------------------------------------------------------------------------------- 18. Miscellaneous The report and financial statements will be sent to all shareholders in the weekcommencing 3rd October 2005 and copies will be available from the Company'sregistered office at 77 Muswell Hill, London N10 3PJ. The Annual General Meeting of the Company will be held at Farmers & FletchersHall, 3 Cloth Street, London EC1A 7LD at 11.00am on 22nd November 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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