20th Sep 2006 07:01
Arena Leisure PLC20 September 2006 ARENA LEISURE PLC INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2006 Arena Leisure Plc ("Arena"), the UK's largest operator of horseracing fixtures,today announces its interim results for the six months ended 30 June 2006. Financial highlights • Turnover increased by 5.7% to £21.9m (2005: £20.7m). • Profit before tax increased by 7.9% to £2.2m (2005: £2.0m). • Earnings per share increased by 7.1% to 0.60 pence (2005: 0.56 pence). • Proposed interim dividend of 0.25 pence per share (2005: 0.25 pence per share). Development highlights • Planning permission granted for hotel and leisure development at Lingfield Park Racecourse. • Doncaster Racecourse's £32m redevelopment on schedule to re-open in August 2007. Submission of a further planning application for a combined hotel and residential development scheduled for late 2006. • Wolverhampton City Council one of 31 councils shortlisted by the Casino Advisory Panel for one of the eight large and eight small new casino licenses. • Planning application to be submitted shortly for Wolverhampton Racecourse to expand the current hotel and incorporate a casino to create the UK's first 'racino'. Raymond Mould, Arena's Chairman, said today: "I am very pleased to report on another successful six-month period for Arena,with solid performances from both our racecourse division and our media rightsjoint venture company, At The Races. "Our racecourse developments continued to progress well. Planning permission wasobtained for the expansion at Lingfield Park and the redevelopment of DoncasterRacecourse is proceeding well and is on schedule to re-open in August 2007. "In accordance with our stated dividend policy, we have declared an interimdividend of 0.25 pence per share that will be paid on 27 October to shareholders on the register at the close of business on 29 September 2006. "The Board looks forward to the future with confidence." For further information please contact: Mark Elliott, Chief ExecutiveArena Leisure Plc Tel: 020-7495-2277 e-mail: [email protected] David Rydell/Geoff CallowBell Pottinger Corporate & Financial Tel: 020-7861-3232 www.arenaleisureplc.com Chairman's Statement I am very pleased to report on another successful six-month period for Arena,with solid performances from both our racecourse division and our media rightsjoint venture company, At The Races ("ATR"). Good progress was also made on ourmajor racecourse development projects, particularly at Doncaster and LingfieldPark. Financial Turnover in the period was up 5.7% at £21.9m (2005: £20.7m), profit before taxincreased by 7.9% to £2.2m (2005: £2.0m), and earnings per share increased by7.1% to 0.60 pence per share (2005: 0.56 pence per share). Operating profit rose by 9.2% to £2.43m (2005: £2.22m). Within this, ATR, whichis 47.5% owned by Arena, performed particularly well, with Arena's share of itsafter tax loss reducing by 76.3% to £0.22m (2005: £0.94m). This result includesan exceptional net receipt of £0.11m relating to litigation (2005: net cost of£0.22m). Earlier this year, ATR's claim for rebates from the 30 racecourses notcurrently affiliated to it, following the termination of media rights agreementsin 2004, was settled with ATR receiving a contribution of £1m, ATR withdrawingits claims and the courses withdrawing their counterclaim. Arena's centraloverhead of £1.19m (2005: £1.00m) includes a one-off cost of around £0.1mincurred in connection with this litigation (2005: £nil). ATR also incurredcosts in defending an appeal by the British Horseracing Board ("BHB") against adecision in 2005 in which the judge found in favour of ATR, ruling that the BHBhad abused its dominant position. A decision is expected later this year. ATRremains optimistic of a positive outcome. The racecourse division performed solidly, although its profits dipped by £0.30m(7.4%) as expected to £3.85m (2005: £4.15m). Attendances in June were impactedby the World Cup, which was particularly noticeable as June typically accountsfor around 30% of attendances in the first half of any given year. We estimatethat the attendance related impact of the World Cup was to reduce profits in thefirst six-months of 2006 by around £0.3m. Total attendances in the first sixmonths of 216,000 were down 4.6% (2005: 226,000). Although disappointing, thisreduction compares favourably with the rest of the UK horseracing industrywhich, in total, saw attendances fall by 10% (excluding Ascot related attendances). Additionally, as a result of Arena taking over Doncaster Racecourse in December 2005, net operating costs of £0.2m were incurred in thefirst half of 2006 during the Racecourse's redevelopment (2005: £0.3m managementfee received). This was partly mitigated by £0.3m generated from Doncaster'srelocated fixtures. Adjusting for the impact of the World Cup and Doncaster inorder to give a better indication of underlying performance, operating profitrose by around 5%, despite a £0.1m increase in utility costs in the first halfof 2006. Racing division and industry developments A key requirement of this division, particularly with its three all-weatherracecourses, is for greater utilisation of its assets. In the first six monthsof 2006 we staged 179 race meetings (2005: 173), an increase of 3.5%, featuring1,238 races (2005: 1,163), an increase of 6.4%. The number of corporate customers increased by 3.5% to 19,000 (2005: 18,350).Within an environment of reduced attendance levels, this was a pleasing result,reflecting our focus on this important customer base. For the full year, Arena was originally scheduled to stage 334 fixtures (2005:324). However, the delayed opening of the proposed new racecourse at GreatLeighs in Essex has resulted in us obtaining a further six fixtures, with theprospect of obtaining a further 14 before the end of the year. If successful, wewould then stage a total of 354 fixtures in 2006, an increase of 9.1% on 2005.The benefit obtained from these additional fixtures will mitigate the reducedattendances experienced to date. In the recent bidding process for 2007 fixtures, Arena acquired 66 fixtures on amixture of one, two and three year leases (2006: 66, all one year leases). Withthe opening date for Great Leighs now rescheduled for 22 February 2007, weanticipate obtaining a further four fixtures at the start of 2007. Arena wouldthen be scheduled to stage 335 fixtures in 2007 (2006: 354 (forecast)), out of1,415 in the UK (2006: 1,391), maintaining our position of staging aroundone-quarter of all racing in the UK. The inclusion in the fixture biddingprocess of both Great Leighs and the re-opened Kempton Park, with its new floodlit, all-weather racecourse, resulted in increased competition forfixtures. I am very pleased that we were able to both maintain the proportion offixtures and obtain a fixture schedule with the potential for an uplift inprofitability. The long-term future of the Levy, which is the major source of revenue for theUK racing industry, remains uncertain. A request has been made to the UKGovernment for the Levy system to be extended indefinitely beyond its scheduledend in 2009. In return, the racing industry has agreed to modernise itsregulatory and governance functions, with a new, single body, the BritishHorseracing Authority, expected to come into effect in early 2007. Arena haslong pursued a more equitable Levy distribution system since we currentlyreceive a much smaller proportion of the Levy than we actually generate. It isanticipated that the Levy Board will review the method for distributing Levyfunds during the winter and it is hoped that it will introduce a fair, equitableand commercial distribution mechanism, whereby a racecourse receives income inproportion to the amount of Levy that its races generate. The racing division's long-term aim is to deliver consistent profit growththrough the provision of great product, superior quality service to ourcustomers and the greater utilisation of our assets on both race days and themany non-race days in between. Catering is a fundamental part of the customerexperience on a racecourse and we are currently reviewing how this will be bestprovided in the coming years. It is an area that we know is capable of bothimproved service to the customer as well as the generation of additionalrevenue. We are also reviewing the introduction of a ticketing and admissionsystem into all of our racecourses to both ensure that admissions procedures arestandardised and tightened and that we capture a greater level of information onour customers for marketing purposes. Updates on both projects will be providedwith the year end results. At The Races ATR progressed well during 2006. A key objective has been to secure greaterinternational distribution and the extension of 48-hour declarations to all UKFlat racing from 1 August 2006 will help considerably. This change allows thosein different time zones sufficiently early access to racecards, providing theopportunity for the race to be marketed and bets to be placed, therebymaximising the revenue potential for UK horseracing in overseas markets. Thesupply of UK racing product to Australia is expected to roll out shortly on aone meeting per week basis following a successful launch over Royal Ascot inJune 2006. ATR's website, attheraces.com, continued to grow and now has in excess of400,000 monthly unique users. The ATR television channel, which is officiallyrecognised as the UK and Ireland's most watched dedicated horseracing channel,now attracts up to 1.45 million individual viewers per month, up from 1.2million at December 2005. The re-opening of Ascot in May provided a boost to thebusiness. Innovations to the television service include the introduction of an'L bar' on the main broadcast channel for the continual provision of racing andbetting information during live programming and commercial breaks and the launchof ATR Active in June for Royal Ascot. ATR Active is an enhanced interactive service available behind the red button toSky's eight million customers. At launch, it provided viewers with access to asecond video feed, offering live, dedicated parade ring coverage and commentarybefore every race at Royal Ascot. Phase 2, which will be launched later thisyear, will offer a range of enhanced features to further improve the raceviewing and betting experience including additional exclusive video content,live prices, tipping and more intuitive racecards. An enhanced form and raceprediction service will also be available ahead of every UK and Irish race.Significantly, since the service lies behind the red button, bookmaker partnerswill, for the first time, have the opportunity in the future of utilisingconventional thirty second advertising spots targeted directly at punters. A successful half year was completed with ATR being named "Best SpecialistChannel" at this year's Broadcast Digital Channel Awards. The judges noted that"At The Races targets its audience with exactly what it wants to see" andpraised the channel for its financial success, "fresh" content and its abilityto make horse-racing accessible to viewers. Developments As we set out in our 2005 Report and Accounts, subject to planning permission,capital expenditure over the coming years will be focused on major revenueenhancing projects as we look to develop new or expanded revenue streams fromour racecourses. In evaluating these major investments, we look for a 15% returnon the net cash cost although, in exceptional circumstances, we may accept areturn as low as 10% which is, nevertheless, still well ahead of our cost ofcapital. Significant progress has been made since the beginning of the year. The £32m redevelopment of Doncaster Racecourse commenced in January 2006 anddemolition of the old, outdated Yorkshire Stand and exhibition hall wascompleted in May. In August, the erection of the steelwork for the newgrandstand and exhibition facilities commenced on schedule. We remain onschedule to re-open in August 2007 and to stage the final classic of the Flatracing season, the Ladbrokes St Leger, on 15 September 2007. Design proposalsfor the development of a combined hotel and residential apartment scheme at theRacecourse are being progressed along with the selection of a hotel operator. Weanticipate being able to appoint the operator in the next few weeks andsubmitting a planning application later this year. Our aim is that, subject toplanning permission, construction of the hotel/residential development will becomplete in time for the 2008 St Leger festival at an estimated net cost of£10m. In March 2006, we submitted an outline planning application for a redevelopmentof part of Lingfield Park Racecourse and a detailed planning application for theconversion of the existing leisure and squash club into 22 residentialapartments, together with the provision of a further three houses within itsgrounds. We worked hard to develop a scheme that complemented the Racecourse'spicturesque, Green Belt surroundings and enhanced the customer experience. Thiswas rewarded in July, when Tandridge District Council resolved to grant planningpermission for both applications. In September, we were delighted to learn thatthe Government Office for the South East had confirmed the applications were notto be called in by the Secretary of State. As a consequence, planning permissionfor the significant improvements at the Racecourse has now been secured, subjectto finalising legal agreements with the Council and the approval of a reservedmatters application. The improvements will complete the transformation of theRacecourse. A total of 22 buildings will be demolished, to be replaced by a newintegrated leisure building incorporating a 120-bedroom hotel, a new golf clubhouse, extensive new leisure facilities including a leisure club with a swimmingpool, restaurant and bars, as well as improvements to the racing facilities. Theestimated net cost of the two related developments is in the region of £25million. The development plans at Wolverhampton Racecourse have progressed well. Theyinclude the expansion of the current hotel from 54 to 170-bedrooms, theconstruction of a new conference, exhibition and banqueting suite, a new leisurefacility including a swimming pool, and the incorporation of a casino within theRacecourse, thereby creating the UK's first 'racino'. We are optimistic that thecause of the failure of our previous planning application for a similardevelopment, namely its negative impact upon the 'openness' of the Green Beltlocation in which the Racecourse is situated, has been fully addressed in ourlatest proposal. We anticipate being able to submit a planning applicationwithin the next two months. The estimated cost of the project is around £20m. We were also pleased that Wolverhampton City Council was one of 31 councilsshortlisted by the Casino Advisory Panel ("CAP") for one of the eight large andeight small new casino licenses. It is expected that the CAP will make itsrecommendations to Government around the end of this year. ShouldWolverhampton's application be successful, we hope that Wolverhampton Racecoursewill be chosen as the best site within Wolverhampton for such a casino. Theintegrated nature of what we are proposing would make a very exciting additionto the City of Wolverhampton. We continue to review the development opportunities at Royal Windsor Racecoursein conjunction with our advisers and in discussion with local authority planningofficials. We are committed to only taking forward a planning application thathas a realistic possibility of achieving full planning consent, considering thesensitive nature of the site in planning terms due to its Green Belt location. In our 2005 Report and Accounts, we stated an intention to build on our corestrengths, adding value through acquisitions where appropriate. During 2006, wehave played a major role in a consortium of racing interests that is attemptingto buy the Tote from the UK Government. A non-disclosure agreement has beensigned and an expression of interest has been submitted which may or may notlead to the consortium's acquisition of the Tote. A response is currentlyawaited from the UK Government. The Tote owns 540 betting shops and has theexclusive licence to run pool betting on horseracing in the UK. Arena will onlyparticipate in a transaction to acquire the Tote if the Board believes that suchan acquisition can generate value for its shareholders. Employees I took over as Chairman from Roger Withers in May 2006. I would like to thankRoger for the dedication and professionalism that he brought to Arena during hisfive-years on the Board and the strong position in which he left the business.Martin McGann joined the Board in June 2006 as a non-executive director andChairman of the Audit Committee. Martin has an extensive background in propertyand finance. I also anticipate announcing the appointment of a second newnon-executive director before the end of this year to complete the make-up ofthe Board. I am extremely grateful to all of my fellow directors and all of our employeesfor their dedication and hard work this year. Their focus and determination togive every one of our customers the best experience possible is fundamental tothe success of Arena and I thank them all for their commitment. Dividend In accordance with our stated dividend policy, we have declared an interimdividend of 0.25 pence per share (2005: 0.25 pence per share) that will be paidon 27 October to shareholders on the register at the close of business on 29 September 2006. Outlook Attendances, which continued to be impacted by the World Cup in the early partof July, have started to return to normal levels. There will be a furtherbenefit in the second half from the additional fixtures that we anticipatereceiving later this year. Overall, we are trading in line with market expectations. The Board looksforward to the future with confidence. Raymond MouldChairman20 September 2006 Arena Leisure PlcInterim Report 2006 Consolidated Income Statement Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £'000 £'000 £'000 ------------ ------------ ---------------- Group turnover 21,912 20,729 40,747Operating costs (14,966) (13,847) (26,235) ------------ ------------ ----------------Gross profit 6,946 6,882 14,512 Profit on sale of investments - - 834Administrative costs (4,300) (3,731) (8,619) Share of post tax results of joint venture (218) (937) (1,529)Share of post tax results of associate - 9 17Write down of investment in associate - - (315) ------------ ------------ ----------------Profit before interest and taxation 2,428 2,223 4,900 Net finance costs (262) (216) (411) ------------ ------------ ----------------Profit before and after taxation 2,166 2,007 4,489 Minority interest 12 - - ------------ ------------ ----------------Profit after taxation attributable to equity shareholders 2,178 2,007 4,489 ------------ ------------ ---------------- Earnings per share: Continuing operations Pence Pence Pence ------------ ------------ ----------------Basic earnings per share 0.60 0.56 1.24Diluted earnings per share 0.60 0.55 1.23 Dividend per ordinary shareProposed for the period 0.25 0.25 0.45 Arena Leisure Plc At At AtConsolidated balance sheet 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £'000 £'000 £'000 ------------ ----------- ----------------Non-current assetsProperty, plant and equipment 76,001 69,302 70,615Goodwill 5,596 4,878 5,596Equity accounted investments (joint ventures and associates) (3,004) (1,887) (2,786)Goodwill in respect of joint venture 1,580 1,580 1,580Loans to joint venture 3,639 1,441 3,284Other investments - 345 - ------------ ----------- ---------------- 83,812 75,659 78,289 ------------ ----------- ----------------Current assetsInventories 34 30 19Trade and other receivables 5,994 5,008 4,785Cash and cash equivalents - - 69 ------------ ----------- ---------------- 6,028 5,038 4,873 ------------ ----------- ---------------- Total assets 89,840 80,697 83,162 ------------ ----------- ----------------Liabilities Current liabilitiesBank overdraft (1,872) (3,512) (3,267)Trade and other payables (9,941) (9,876) (9,368)Other financial liabilities (315) (326) (315) ------------ ----------- ---------------- (12,128) (13,714) (12,950) ------------ ----------- ----------------Non-current liabilitiesFinancial liabilities (13,423) (5,952) (7,632)Accruals and deferred income (2,780) (2,912) (2,807) ------------ ----------- ---------------- (16,203) (8,864) (10,439) ------------ ----------- ---------------- Total liabilities (28,331) (22,578) (23,389) ------------ ----------- ---------------- Net Assets 61,509 58,119 59,773 ------------ ----------- ---------------- EquityShare capital 18,210 18,075 18,100Share premium account 223 - 46Other reserves 5,417 5,417 5,417Retained earnings 37,671 34,627 36,210Minority interest (12) - - ------------ ----------- ----------------Total equity 61,509 58,119 59,773 ------------ ----------- ---------------- Arena Leisure Plc Six months Six months YearConsolidated Cash Flow ended ended ended 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited Operating activities £'000 £'000 £'000 ------------ ------------ ----------------Profit for the period 2,178 2,007 4,489Adjustments for:Depreciation 972 843 1,847Impairment provision - Wolverhampton development - - 400Share-based payment expense 11 - 5Net interest expense 262 216 411Share of loss of joint venture 218 937 1,529Share of income of associate - (9) (17)Impairment provision - Trackplay LLC - - 315Profit on sale of property, plant and equipment (3) (3) (69)Profit on sale of SIS shares - - (834)Taxation provision released - - (5)Grant amortisation (27) - -Minority interest (12) - - ------------ ------------ ----------------Operating profit before changes in working capital and provisions 3,599 3,991 8,071 Increase in trade and other receivables (1,209) (1,121) (881)(Increase)/decrease in inventories (15) - 11Increase/(decrease) in trade and other payables 573 439 (1,014) ------------ ------------ ----------------Cash flows from operating activities 2,948 3,309 6,187 Investing activitiesPurchase of property, plant and equipment (6,393) (2,442) (4,409)Sale of property, plant and equipment 38 44 184Proceeds from sale of SIS shares - - 1,179Loans to joint venture (355) 1,550 (174)Investment in Doncaster Racecourse Management Company Ltd - - (718) Investment in joint venture - (206) (206)Interest received - - 231 ------------ ------------ ---------------- (6,710) (1,054) (3,913)Financing activitiesIssue of ordinary shares 287 - 71Net proceeds from bank and other borrowings 5,791 - -Repayment of loans - (3,000) (1,326)Repayment of finance lease creditors - - (14)Interest paid (262) (188) (725)Tax paid - (5) -Dividends paid (728) (1,084) (1,988) ------------ ------------ ---------------- 5,088 (4,277) (3,982) ------------ ------------ ---------------- Increase/(decrease) in cash and cash equivalents 1,326 (2,022) (1,708) Cash and cash equivalents at 1 January (3,198) (1,490) (1,490) ------------ ------------ ----------------Cash and cash equivalents at period end (1,872) (3,512) (3,198) ------------ ------------ ---------------- Arena Leisure PlcInterim Report 2006 Notes to the Accounts 1 Basis of preparation The interim financial statements have been prepared in accordance with the accounting policies and presentation required by International Financial Accounting Standards, incorporating International Accounting Standards (IAS) and interpretations (collectively IFRS), which are applicable for use in the Company's annual financial statements for the year ended 31 December 2006. 2 Taxation The tax charge for the period is nil due to the availability of tax losses. 3 Earnings per share Basic earnings per share have been calculated using the weighted average number of shares in issue during the periods. The weighted average number of share in issue for the six months to 30 June 2006 is 364,048,748 (six months to 30 June 2005: 361,495,535 and the year to 31 December 2005: 361,517,453). The calculation of diluted earnings per share is calculated using the weighted average number of shares in issue, adjusted for the number of outstanding share options capable of being exercised. 4 Segmental information Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £'000 £'000 £'000 ------------ ------------ ---------------- Turnover Racecourse operations 21,912 20,729 40,747 ------------ ------------ ---------------- Profit before interest and taxation Racecourse operations 3,845 4,153 8,021 Central costs (1,199) (1,002) (2,128) Sale of SIS shares - - 834 ------------ ------------ ---------------- Share of At The Races operating loss (269) (683) (1,038) Share of exceptional legal credit/(costs) 110 (220) (863) Share of At The Races interest costs (59) (34) (92) Share of At The Races tax credit - - 464 ------------ ------------ ---------------- Share of At The Races results after tax (218) (937) (1,529) Share of Trackplay LLC results after tax - 9 17 Write down of investment in associate - - (315) ------------ ------------ ---------------- 2,428 2,223 4,900 ------------ ------------ ---------------- 5 Statement of changes in equity Share Share Other Profit and Capital premium reserves loss account account £'000 £'000 £'000 £'000 ------------ ------- -------- ------------ At 1 January 2005 18,075 - 5,417 33,704 Profit for six months to 30 June 2005 - - - 2,007 Dividend - - - (1,084) ------------ ------- -------- ------------ At 30 June 2005 18,075 - 5,417 34,627 Profit for six months to 31 December 2005 - - - 2,482 Dividend - - - (904) Share-based payment expense - - - 5 Issue of ordinary shares 25 46 - - ------------ ------- -------- ------------ At 31 December 2005 18,100 46 5,417 36,210 Profit for six months to 30 June 2006 - - - 2,178 Dividend - - - (728) Share-based payment expense - - - 11 Issue of ordinary shares 110 177 - - ------------ ------- -------- ------------ At 30 June 2006 18,210 223 5,417 37,671 ------------ ------- -------- ------------ 6 Statement of net debt At At At 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £'000 £'000 £'000 ------------ ------------ ---------------- Cash and cash equivalents - - 69 Bank overdraft (1,872) (3,512) (3,267) ------------ ------------ ---------------- Net cash and cash equivalents at end of period (1,872) (3,512) (3,198) Bank loans (12,791) (5,000) (7,000) HBLB loans (644) (970) (644) ------------ ------------ ---------------- Net debt at end of period (15,307) (9,482) (10,842) ------------ ------------ ---------------- 7 Auditors' Report The figures for the year ended 31 December 2005 are based on the accounts which have been filed with the Registrar of Companies. The auditors' report on the accounts prepared under IFRS and filed with the Registrar of Companies was unqualified and did not contain a statement under Section 237 (2) - (3) of the Companies Act 1985. These accounts do not comprise statutory accounts under the meaning of Section 240. 8 Dividends Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 ------------ ------------ ---------------- Dividend declared in respect of the period 911 1,084 1,632 ------------ ------------ ---------------- The proposed interim dividend of 0.25 pence per ordinary share in respect of the six months ending 30 June 2006 was approved by the board on 19 September 2006 and in accordance with IFRS has not been included as a liability at 30 June 2006. 9 Restatement Turnover and cost of sales for the period ended 30 June 2005 have been restated to reflect the accounting treatment adopted at 31 December 2005 in respect of industry funding for integrity fees. Previously this was recorded . net of costs incurred within cost of sales. The impact of this restatement has been to gross up both turnover and cost of sales by £530,000 for the six months to 30 June 2005. The restatement does not impact on the reported profit for this period. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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