14th Mar 2008 07:01
Powerleague Group plc14 March 2008 The Champions of 5-a-side Powerleague Group plc Half Yearly Financial Report for the 6 months ended 29 December 2007 14 March 2008 Introduction Powerleague Group plc is the market-leading commercial operator of premiumquality 5-a-side football centres in the United Kingdom. Following the acquisition on 26 February 2008 of JJB Sports plc's UK 'SoccerDome' indoor 5-a-side football centres, the Group now operates 43 centres,comprising 455 floodlit, all-weather outdoor and indoor pitches throughout theUK and attracts in excess of 120,000 players each week. Highlights for the six months ended 29 December 2007 * Revenue increased by 4% to £11.3 million (2006: £10.9 million) * Centre like for like revenue increased by 2% (2006: 5%) - Like for like pitch income increased by 5% (2006: 5%) - Like for like bar income decreased by 8% (2006: decreased by 3%) * Sponsorship and events revenue increased by 12% (2006: 62%) * EBITDA increased by 3% to £3.6 million (2006: £3.5 million) * Three new centres opened, in August, September and October, and a further site went under construction during the period with capital expenditure of £3.6m incurred * Further investment of £1.4 million made during summer 2007 in upgrading eighty pitches at eight centres * Earning per share decreased by 3% (2006: increased by 25%) as a result of pre-opening costs, depreciation and interest arising from new site openings and capital expenditure in the period which were not incurred in the comparative period * After the half year end: - one further centre opened at Shrewsbury - acquisition of five Soccer Dome centres from JJB Sports plc, for £17.4 million Claude Littner, Chairman, commented: "Trading during the first nine weeks of thesecond half of the year remains strong, is in line with expectations and we areon target to achieve our plan for the full year. The financial period fromJanuary to the end of June is traditionally stronger than the first half as wedo not have the seasonal downturn in activity of the July/August and Christmas/New Year holiday periods. The popularity of 5-a-side football continues unabatedand participation numbers continue to increase." Enquiries: Powerleague Group plc Claude Littner, Executive Chairman Sean Tracey, Chief Executive Tel: 020 7920 3150 (14 March only) Tel: 0141 887 7758 (thereafter) Cenkos Securities plcStephen KeysTel: 020 7397 8926 Tavistock CommunicationsLulu BridgesJohn WestTel: 020 7920 3150 Powerleague Group plcSix months ended 29 December 2007 Chairman's Statement Results I am pleased to announce further progress in our Company. Sales for the sixmonths ended 29 December 2007 were £11.3m (2006: £10.9m), an increase of 4%.Like for like sales grew by 2% (2006: 5%). EBITDA increased by 3% to £3.6m(2006: £3.5m), with like for like EBITDA up by 4%. The Company refurbished a further eighty pitches during the first half of theyear at a cost of £1.4 million and over 80% of the estate now benefits from thevery latest pitch surfaces. Pitch income remained buoyant with 5% like for likegrowth and sponsorship and events income showed further strong growth of 12%,however bar revenues have declined by 8%, reflecting the general trend in thebar and pub sector. We have strategies in place to address this situation. The addition of three new centres in this period and a fourth which opened inJanuary 2008 incurred capital expenditure of £3.6 million, compared with theprior year period during which there were no new openings. The pre-opening costsassociated with the additional centres coupled with the increase in depreciationand interest costs arising from the additional capital expenditure adverselyimpacted our first half profit comparatives as these costs have been absorbedand accounted for in this period. Dividends and Share Options In December 2007, the Company paid a final dividend of 1.1 pence per ordinary10p share in respect of the year ended 1 July 2007. Historically we have notpaid dividends at the interim stage, and once again, we do not propose aninterim dividend, but intend to recommend a final dividend in line with ourprogressive policy. On 12 October 2007, under the Powerleague Group plc 2006 Share Option Scheme,options over a total of 195,000 shares were granted to a number oflong-serving employees. Operational Review We have continued to benefit from the increasing popularity of 5-a-sidefootball, capitalising on the strength of our leading position within the marketto develop new centres and successfully monetise sponsorship and brandpartnerships. During the first half of the year, three new centres were opened. PowerleagueCardiff which opened in August is located at the largest comprehensive school inthe country, off a main arterial road in to the city. Old Street opened inSeptember and is an innovative indoor centre with 4 pitches in the heart of theCity of London. The centre has a unique location and offering and is proving tobe very popular with City-based football enthusiasts. Milton Keynes, a £2million development, opened in October and is another school site which wassuccessfully won via a tender process. Sales at each of these new centres arehighly encouraging and they will all make a positive contribution in the secondhalf of the year. We have also continued with our commitment to invest in our estate wherecommercially justifiable by upgrading existing pitches and extending facilities.During the summer months our centres at Nottingham, Newham, Catford, Fairlop,Peterborough, Stockport and Stoke underwent pitch refurbishments and now benefitfrom the latest 5th generation surfaces. Although this investment has had ashort term adverse impact on sales at these centres as a number of the pitcheswere unavailable, the longer term will see a positive outcome, through acombination of increased occupancy rates, player participation numbers andtargeted price increases. Planning has now been secured for three new pitches at Mill Hill (2 x 5-a-side)and Stockport (1 x 7-a-side). These pitches are now scheduled for constructionin July and opening in September to take advantage of a strong playerrecruitment period. In January 2008, we opened a further new centre in Shrewsbury, alongside thegrounds of the football club's new stadium. The centre has six 5-a-side and one7-a-side pitch and the bar will benefit from revenues when the Club hosts homegames. Sales to date are promising. 5 Premier Acquisitions Following a competitive tendering process, Powerleague, the leading 5-a-sideoperator acquired the entire UK 5-a-side estate of JJB Sports plc Soccer Domes,the number three operator in the market. This transaction, which was completedand announced on 26 February 2008 at a cost of £17.4 million in cash, representsa step-change in our development. We are now in the unique position of offeringcustomers the opportunity to experience both exceptional outdoor and now superbindoor facilities. Furthermore, Powerleague may increase its pipeline of futuresites by working alongside JJB as it rolls out its highly successful health clubformat, thereby adding further value to the deal. The five centres inManchester, Blackburn, Wigan, Derby and North Shields are all profitable, cashgenerative and dovetail well into our current estate. All the centres are builtto a highly exacting standard and have the latest next generation playingsurfaces in place, along with first class changing facilities, licensed bars andfunction rooms. With our proprietary software, management know-how and focusedstrategy we believe significant efficiencies and synergies will be achieved. Ourexisting sponsors have strongly welcomed the acquisition of these centres and weanticipate further growth in sponsorship income, together with additional localand national events as a result of adding these centres to our existingportfolio of facilities. Sponsorship and Events Sponsorship revenues have grown by 12% year on year. This continued sponsorshipgrowth, together with the Company's ability to attract new major brands and hostfurther new local and national 5-a-side events for a wide range of companies,has been highly encouraging. I am pleased to announce that the Company hassigned a new sponsorship agreement with Nivea For Men who will become ourofficial "grooming" sponsor. This agreement will complement our existingportfolio of major brand partners and reinforces our success at attracting andretaining strong brands and monetising sponsorship from grass roots football. Iam also delighted to announce that we have signed a three year sponsorshipagreement with Coors Brewers. As well as bringing Carling lager, their leadingUK beer brand into all Powerleague bars, a lucrative sponsorship agreement willrun alongside the supply agreement. I am confident this new sponsor and supplierwill help further drive bar revenues as new lines are introduced including thelow strength C2 lager which we anticipate being highly popular with customers.In spite of the fact that England will not be represented at Euro 2008, weexpect further strong progress from sponsorship and events in the second half ofthe year and I remain optimistic about the potential for further strong growthin this area of activity, both in the short and longer term. Outlook Trading during the first nine weeks of the second half of the year remainsstrong, is in line with expectations and we are on target to achieve our planfor the full year. The financial period from January to the end of June istraditionally stronger than the first half as we do not have the seasonaldownturn in activity of the July/August and Christmas/New Year holiday periods.The popularity of 5-a-side football continues unabated and participation numberscontinue to increase. Powerleague attracts a wide age range of customers on aregular basis who enjoy our superior offering and excellent facilities. We have a strong pipeline of new sites at various stages in the developmentprocess, which will enable us to maintain or increase our rollout programme in2008 and beyond. We do not plan any further new site openings in the second halfof the year, as we concentrate our efforts on integrating the newly acquiredSoccer Dome centres into our estate. We are delighted to have acquired theseoutstanding indoor centres and believe that under our stewardship they will growand achieve their full potential. Finally, we have an experienced and focusedmanagement team with loyal and motivated staff. All this continues to augur wellfor the future. Claude LittnerChairman INDEPENDENT REVIEW REPORTFor the six months ended 29 December 2007 IntroductionWe have been engaged by the Company to review the condensed set of financialstatements in the Interim Report for the six months ended 29 December 2007 whichcomprises the Group income statement, the Group statement of recognised income and expense,the Group balance sheet and the Group cash flow statement and the related notes 1 to 7. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the information in the condensed set of financialstatements. This report is made solely to the Company in accordance with guidance containedin ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performedby the Independent Auditor of the Entity" issued by the Auditing PracticesBoard. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our work, for this report,or for the conclusions we have formed. Directors' ResponsibilitiesThe Interim Report is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the Interim Report inaccordance with the AIM Rules issued by the London Stock Exchange, which requirethat it is presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts. The condensed set of financial statements included in this interim reporthas been prepared in accordance with the basis of preparation outline in note 1.The condensed set of financial statements included in this Interim Report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange. Our ResponsibilityOur responsibility is to express to the Company a conclusion on the condensedset of financial statements in the Interim Report based on our review. Scope of ReviewWe conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. ConclusionBased on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the Interim Report for the sixmonths ended 29 December 2007 is not prepared, in all material respects, inaccordance with the basis of preperation outlined in note 1 and in accordance with the AIM Rules issued by the London Stock Exchange. Ernst & Young LLPGlasgow13 March 2008 Powerleague Group Plc Group income statementSix months ended 29 December 2007 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000-------------------------------------------------------------------------------Revenue 11,261 10,855 23,030 Cost of sales (1,893) (1,904) (3,946) -------------------------------------------------------------------------------Gross profit 9,368 8,951 19,084------------------------------------------------------------------------------- Administrative expenses (6,893) (6,386) (12,994)Exceptional items 2 - (28) (28)-------------------------------------------------------------------------------Total administration expenses (6,893) (6,414) (13,022)--------------------------------------------------------------------------------------------------------------------------------------------------------------Operating profit 2,475 2,537 6,062--------------------------------------------------------------------------------------------------------------------------------------------------------------Analysed as:Operating profit excluding exceptional items 2,475 2,565 6,090Exceptional items 2 - (28) (28)------------------------------------------------------------------------------- Finance revenue - bank interest 2 5 6Finance costs (612) (560) (1,110) -------------------------------------------------------------------------------Profit for the period before tax 1,865 1,982 4,958------------------------------------------------------------------------------- Tax expense 3 (659) (739) (1,299) -------------------------------------------------------------------------------Profit for the period 1,206 1,243 3,659------------------------------------------------------------------------------- Earnings per ordinary share- basic and diluted 4 1.47 1.52 4.47 Group statement of recognised income and expenseSix months ended 29 December 2007 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the period 1,206 1,243 3,659------------------------------------------------------------------------------- Total recognised income and expensefor the period attributable to equityholders of the parent 1,206 1,243 3,659------------------------------------------------------------------------------- Powerleague Group Plc Group balance sheetas at 29 December 2007 As at As at As at 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000------------------------------------------------------------------------------- Non-current assetsProperty, plant and equipment 47,879 42,377 43,940Intangible assets 258 258 258Other receivables 289 352 302------------------------------------------------------------------------------- 48,426 42,987 44,500------------------------------------------------------------------------------- Current assetsInventories 171 181 158Trade and other receivables 1,322 775 1,516Cash and cash equivalents 321 347 549------------------------------------------------------------------------------- 1,814 1,303 2,223-------------------------------------------------------------------------------------------------------------------------------------------------------------- Total assets 50,240 44,290 46,723------------------------------------------------------------------------------- Current liabilitiesTrade and other payables 2,203 2,359 3,310Income tax payable 613 1,264 571Borrowings 6,320 5,024 4,991------------------------------------------------------------------------------- 9,136 8,647 8,872------------------------------------------------------------------------------- Non-current liabilitiesOther payables 249 323 329Borrowings 16,802 14,131 14,060Deferred tax liabilities 4,431 4,316 4,164------------------------------------------------------------------------------- 21,482 18,770 18,553--------------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities 30,618 27,417 27,425--------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 19,622 16,873 19,298------------------------------------------------------------------------------- EquityCalled up share capital 5 8,182 8,182 8,182Share premium account 5 7,287 7,287 7,287Merger reserve 5 (4,999) (4,999) (4,999)Retained earnings 5 9,152 6,403 8,828-------------------------------------------------------------------------------Total equity 19,622 16,873 19,298------------------------------------------------------------------------------- These financial statements were approved by the Board of Directors on 12 March2008. Sheena BeckwithDirector Powerleague Group Plc Group cash flow statementSix months ended 29 December 2007 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000--------------------------------------------------------------------------------------------------------------------------------------------------------------Net cash flow from operating activities 6 2,160 2,572 6,421------------------------------------------------------------------------------- Cash flows from investing activitiesPurchase of property, plant and equipment (5,063) (1,887) (4,790)Sale of property, plant and equipment - 45 45Interest received 2 5 6-------------------------------------------------------------------------------Net cash flow from investing activities (5,061) (1,837) (4,739)------------------------------------------------------------------------------- Cash flows from financing activitiesInterest paid (492) (532) (1,170)Dividends paid to shareholders (900) (614) (614)New borrowings 4,499 321 17,633Repayment of borrowings (1,763) (1,334) (17,860)-------------------------------------------------------------------------------Net cash flow from financing activities 1,344 (2,159) (2,011)--------------------------------------------------------------------------------------------------------------------------------------------------------------Net (decrease)/increase in cash and cash equivalents (1,557) (1,424) (329)Cash and cash equivalents at beginning of period (927) (598) (598)-------------------------------------------------------------------------------Cash and cash equivalents at end of period (2,484) (2,022) (927)------------------------------------------------------------------------------- Poweleague Group Plc Six months ended 29 December 2007 Notes to the financial information 1 Basis of preparation This interim report, which does not constitute statutory accounts within themeaning of section 240 of the Companies Act 1985, was approved by the Board on12 March 2008. The condensed set of financial statements in this interim report has been prepared in accordance with accounting policies which will be adopted in presenting the full year annual report and accounts for the year ending 28 June 2008. The full year annual report and accounts will be prepared in accordance with International Financial Reporting Standards("IFRS")as adopted bythe European Union. The Group has not applied IAS 34 Interim Financial reporting in the preperation of these condensed interim financial statements, as it is not mandatory for AIM listed Companies. The financial information for the full preceding year does not constitutestatutory accounts as defined in Section 240 Companies Act 1985 and has beenextracted from the statutory accounts for the financial year ended 30 June 2007.Those accounts, upon which the auditors issued an unqualified audit report andwhich did not contain a statement under either Section 237 (2) or Section 237(3) of the Companies Act 1985, have been delivered to the Registrar ofCompanies. For all periods up to and including the year ended 1 July 2006, the Groupprepared its financial statements in accordance with United Kingdom generallyaccepted accounting practice (UK GAAP). For the year to 30 June 2007, the Groupelected to prepare its financial statements in accordance with InternationalFinancial Reporting Standards (IFRSs).Refer to note 7 for further details ofthe transition to IFRSs. The interim report consolidates the financial information of Powerleague Groupplc and its subsidiaries, drawn up to 29 December 2007. 2 Exceptional items 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000--------------------------------------------------------------------------------------------------------------------------------------------------------------Loss on sale of assets - 28 28------------------------------------------------------------------------------- 3 Taxation Tax on profit on ordinary activitiesThe charge for taxation on profit for the period comprises: 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000-------------------------------------------------------------------------------Current tax:UK corporation tax 455 560 1,329Adjustment in respect of prior periods (63) - (57)------------------------------------------------------------------------------- 392 560 1,272------------------------------------------------------------------------------- Deferred tax:Origination and reversal of temporary differences 200 179 306Adjustment in respect of prior periods 67 - -Effect of reduction in tax rate from 30% to 28% - - (279)------------------------------------------------------------------------------- 267 179 27-------------------------------------------------------------------------------------------------------------------------------------------------------------- 659 739 1,299------------------------------------------------------------------------------- UK corporation tax is calculated at 30% (2006: 30%) of the estimated assessableprofit for the period. Reconciliation of the total tax charge The charge for the period can be reconciled to the profit for the period beforetaxation per the consolidated income statement as follows: 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000-------------------------------------------------------------------------------Profit for the period before taxation 1,865 1,982 4,958-------------------------------------------------------------------------------Profit for the period before taxation multiplied by the standard rate ofcorporation tax in the UK of 30% (2006:30%) 560 595 1,487Effects of:Expenses not deductible for tax purposes 95 144 136Adjustment in respect of rate changes - - (279)Adjustment in respect of prior periods 4 - (57)Other - - 12-------------------------------------------------------------------------------Charge for taxation on profit for the period 659 739 1,299------------------------------------------------------------------------------- 4 Earnings per share Basic earnings per ordinary 10p share is calculated by dividing the earningsattributable to ordinary shareholders by the weighted average number of ordinaryshares in issue during the period, which at 29 December 2007 was 81,820,000(June 07: 81,820,000, December 2006: 81,820,000). Diluted earnings per share is calculated by dividing the earnings attributableto ordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period plus the weighted average number of ordinaryshares that would be issued on the conversion of all the dilutive potentialordinary shares into ordinary shares. For the 6 months ended 29 December 2007,this was 82,010,000 (June 07: 81,954,000, December 2006: 81,859,000). 6 months ended 6 months ended Year ended 29 December 2007 30 December 2006 30 June 2007 ------------------------------------------------------------------------ Profit for Earnings Profit for Earnings Profit for Earnings the period per share the period per share the year per share £000 p £000 p £000 p Basic earnings per share 206 1.47 1,243 1.52 3,659 4.47 Diluted earnings per share 1,206 1.47 1,243 1.52 3,659 4.47 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) No.('000) No.('000) No.('000)-------------------------------------------------------------------------------Basic weighted average number of shares 81,820 81,820 81,820Dilutive potential ordinary shares:Employee share options 190 39 134-------------------------------------------------------------------------------Diluted weighted average number of shares 82,010 81,859 81,954------------------------------------------------------------------------------- 5 Reconciliation of movements in equity Share Share Group Retained capital premium merger earnings Total £'000 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------------------------------------------------------------------------------------At 1 July 2006 (audited) 8,182 7,287 (4,999) 5,770 16,240Share based payment - - - 4 4Dividend paid - - - (614) (614)Profit for the period - - - 1,243 1,243At 30 December 2006 8,182 7,287 (4,999) 6,403 16,873Share based payment - - - 9 9Profit for the period - - - 2,416 2,416-------------------------------------------------------------------------------At 30 June 2007 8,182 7,287 (4,999) 8,828 19,298Share based payment - - - 18 18Dividend paid - - - (900) (900)Profit for the period - - - 1,206 1,206-------------------------------------------------------------------------------At 29 December 2007 8,182 7,287 (4,999) 9,152 19,622------------------------------------------------------------------------------- 6 Reconciliation of cash flow from operating activities 6 months 6 months Year ended ended ended 29 December 30 December 30 June 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000-------------------------------------------------------------------------------Profit for the period 1,206 1,243 3,659Taxation expense 659 739 1,299Net interest expense 610 555 1,104Operating profit 2,475 2,537 6,062Adjustments for:Depreciation of property, plant and equipment 1,124 974 2,279Release of deferred grant - - (1)(Increase)/decrease in inventories (13) (7) 16Decrease/(increase) in receivables 207 368 (288)Decrease in payables (1,283) (1,300) (231)-------------------------------------------------------------------------------Cash flow generated from operating activities 2,510 2,572 7,837Income taxes paid (350) - (1,416)-------------------------------------------------------------------------------Net cash flow from operating activities 2,160 2,572 6,421------------------------------------------------------------------------------- 7 Transition to International Financial Reporting Standards ("IFRSs") For all periods up to and including the year ended 1 July 2006, the Groupprepared its financial statements in accordance with United Kingdom generallyaccepted accounting practice (UK GAAP). The Group is required to report underIFRSs from its interim results for the six month period ended 29 December 2007but elected to adopt IFRS earlier and the financial statements for the yearended 30 June 2007 were prepared in accordance with IFRSs as adopted by theEuropean Union (EU). The period to 30 December 2006, which was previously prepared inaccordance with United Kingdom generally accepted accounting practice (UK GAAP),has been restated to encompass those changes in accounting policies and otherrestatements required by IFRS. This note explains the principal adjustments madeby the Group in restating its UK GAAP balance sheet as at 30 December 2006 and profit and cash flows for the period then ended. Group reconciliation of equity at 30 December 2006 IFRS 5 IAS 16 Non- Property IAS 36 IFRS 3 Current IAS 7 IAS 12 plant & impairment business UK assets Cash Taxation equipment of assets Combinations GAAP (note 2) (note 3) (note 4) (note 5) (note 6) (note 7) IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000----------------------------------------------------------------------------------------------------------------------- Non-current assetsProperty, plant and equipment 69,329 (29,326) 2,374 42,377Negative goodwill (1,761) (118) 2,137 258Other receivables 152 200 352----------------------------------------------------------------------------------------------------------------------- 67,720 (118) 200 (29,326) 2,374 2,137 42,987----------------------------------------------------------------------------------------------------------------------- Current assetsInventories 181 181Trade and other receivables 725 50 775Cash and cashequivalents 597 (250) 347----------------------------------------------------------------------------------------------------------------------- 1,503 (200) 1,303----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 69,223 (118) (29,326) 2,374 2,137 44,290----------------------------------------------------------------------------------------------------------------------- Current liabilitiesTrade and other payables 2,359 2,359Taxation payable 1,233 31 1,264Borrowings 5,024 5,024----------------------------------------------------------------------------------------------------------------------- 8,616 31 8,647----------------------------------------------------------------------------------------------------------------------- Non-currentliabilitiesOther payables 323 323Borrowings 14,131 14,131Deferred tax liabilities 2,863 1,032 421 4,316----------------------------------------------------------------------------------------------------------------------- 17,317 1,032 421 18,770----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total liabilities 25,933 1,063 421 27,417----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 43,290 (118) (1,063) (29,326) 2,374 1,716 16,873----------------------------------------------------------------------------------------------------------------------- EquityCalled up share capital 8,182 8,182Share premium account 7,287 7,287Merger reserve (4,999) (4,999)Revaluation reserve 20,831 (20,831) Retained earnings 6,990 (118) (1,063) (3,496) 2,374 1,716 6,403-----------------------------------------------------------------------------------------------------------------------Total equity 43,290 (118) (1,063) (29,326) 2,374 1,716 16,873----------------------------------------------------------------------------------------------------------------------- Group reconciliation of profit for the six months ended 30 December 2006 UK GAAP Restated IFRS £'000 (note 8) £'000-------------------------------------------------------------------------------Revenue 10,855 10,855 Cost of sales (1,904) (1,904) --------------------------------Gross profit 8,951 8,951 Administrative expenses (6,669) 282 (6,387)Exceptional items (28) (28) --------------------------------Total administration expenses (6,669) 254 (6,415) Operating profit 2,282 254 2,536 Finance costs (554) (554) --------------------------------Profit for the period before tax 1,728 254 1,982 Tax expense (752) 13 (739) --------------------------------Profit for the period 976 267 1,243 ------------------------------------------------------------------------------- Notes to the restatement of equity from UK GAAP to IFRS (1) IFRS 3 - 'Business combinations'The Group took the option exemption under IFRS 1 'First Time Adoption ofInternational Reporting Standards' not to apply IFRS 3 - 'Business combinations'retrospectively to acquisitions or mergers which occurred prior to 2 July 2005.As required in IFRS 3, the Group revisited the acquisition accounting for JJBoyle Leisure Ltd which was acquired in May 2006 and as a result, goodwill aroseon acquisition in the year ended 1 July 2006 (see note (7) below). (2) IFRS 5 - 'Non-current assets held for sale'Under UK GAAP, assets held for sale are not separately classified, but heldwithin Total Fixed Assets. IFRS 5 requires that any assets held for sale and anyrelated liabilities should be separately classified on the balance sheet andshould not be depreciated from the date they meet the criteria to be recognisedas held for sale. At 1 July 2006, £283,000 was classified as being held forsale, being the impaired net book value of the Dunfermline centre. Negative goodwill held on the balance sheet under UK GAAP was de-recognised at transition and the £118,000 previously released on disposal of this centre has now been charged to profit. The Dunfermline centre was sold in September 2006. (3) IAS 7 - 'Cash and cash equivalents'Under UK GAAP, cash on hand included deposits held on escrow by third partieswith the potential to be released back to the Group on satisfaction of certainconditions, over a period of up to five years. However, IAS 7 defines cashequivalents as those with an expected maturity of less than three months.Consequently, a balance of £250,000 is reclassified from cash and cashequivalents in the Group Balance Sheet at 30 December 2006. (4) IAS 12 - 'Income taxes'Under UK GAAP, there is no provision made for deferred taxation on assets whichhave been revalued, as there was no commitment at each Balance Sheet date torealise the assets in a manner giving rise to a tax liability. IAS 12 requiresthat where assets are revalued and they are subsequently being depreciated, atemporary difference exists and provision for deferred taxation is required. Whilst the majority of revaluations previously held in the balance sheet havebeen reversed under IAS 16, where these revaluations related to the fair valueadjustment of an acquisition, the revaluation cannot be reversed. Accordingly, adeferred taxation liability of £1,514,000 was recognised at 2 July 2005, on theassets of the VIDA acquisition. The net impact of the IFRS changes on deferred taxation is as follows: £'000 ------------------------------------------------------------- Provision on VIDA assets 1,514 Reversal of temporary differences year to June 06 (438) Reversal of temporary differences 6 months to December 06 (44) ------------------------------------------------------------- Reversal of timing differences 1,032 ------------------------------------------------------------- As a result of the changes arising under IFRS to profit before tax for theperiod, an increase of £31,000 in corporation taxation has been recognised. (5) IAS 16 - 'Property, Plant and Equipment'Under UK GAAP, at the date of transition, properties were carried at theirrevalued amount on the basis of their value in use. The Group elected not totake the exemption under IFRS 1 'First Time Adoption of International ReportingStandards' to measure assets at transition at their fair value or previouslyrevalued amount under IFRS, but applied IAS 16 retrospectively to measure assetsat their depreciated historical cost. The impact on equity was as follows: £'000 ------------------------------------------------------------- Elimination of revaluation reserve (26,167 Amounts previously applied to eliminate merger reserve 4,999 Transfer to profit for current period 337 ------------------------------------------------------------- Change in revaluation reserve (20,831) ------------------------------------------------------------- Reversal of previous impairment credit (note below *) (3,523) Reduction of depreciation prior periods 44 Increase in depreciation current period (17) ------------------------------------------------------------- Change in profit and loss reserve (3,496) ------------------------------------------------------------- ------------------------------------------------------------- Amounts previously applied to eliminate merger reserve (4,999) ------------------------------------------------------------- Change in merger reserve (4,999) ------------------------------------------------------------- ------------------------------------------------------------- Net change in reserves (29,326) ------------------------------------------------------------- * Note: under UK GAAP, where a revaluation surplus related to a formerimpairment of assets, this surplus was credited to the profit and loss account.Under IFRS, on reversal of the revaluation, this credit was therefore reversedalso. (6) IAS 36 - 'Impairment of Assets'In common with UK GAAP, IAS 36 requires that a review is carried out at leastannually to ensure that the carrying value of an asset is not in excess of itsrecoverable amount, being the higher of an asset's (or cash-generating unit's)fair value less costs to sell and its value in use. The future cash flow of eachcentre were being compared with its carrying value at transition and at 1 July2006. The following adjustments were made to carrying value: £'000 ------------------------------------------------------------- Reversal of previous impairment 3,322 Impairment of property, plant and equipment (948) ------------------------------------------------------------- Net change in reserves 2,374 ------------------------------------------------------------- The reversal of previous impairment of tangible fixed assets relates to animpairment of certain facilities that was recognised in the profit and lossaccount in the year ended 30 June 2001 and has arisen as a result of animprovement in trading performance and in the expected cash flows arising fromthe operation of these facilities. (7) IFRS 3 - 'Business Combinations'Under UK GAAP, entities are permitted to capitalise negative goodwill arising ona business combination. However, IFRS 3 prohibits this treatment and requiresthat any excess of an acquirer's interest in the net fair value of an acquiree'sidentifiable net assets over the cost of those assets should be recognisedimmediately in profit or loss. As a result, the Group has derecognised negativegoodwill as noted in the table below. As required in IFRS 3, the Group has also revisited the acquisition accountingfor JJ Boyle Leisure Ltd which was acquired in May 2006 and as a result,goodwill arose on acquisition as shown in the following table: £'000 --------------------------------------------------------------- De-recognition of negative goodwill at 1 July 2006 1,870 Reversal of release of negative goodwill for six months to 30 December 2006 (154) --------------------------------------------------------------- Net change in reserves 1,716 --------------------------------------------------------------- (8) Restatement of profit for the period ended 30 December 2006 from UK GAAP to IFRSThe effect of the above differences on reported profit of the Group for the sixmonths ended 30 December 2006 is as follows: £'000 ------------------------------------------------------------------- Reported profit under UK GAAP Note 976 Reduction in depreciation arising from reclassification of asset held for sale (2) 2 Reduction in depreciation arising from restatement to historical cost (5) 320 Holiday pay accrual reversed (9) 88 Reclassification of exceptional items (loss on disposal) 26 Reversal of amortisation of negative goodwill (7) (154) ------------------------------------------------------------------- Decrease in administrative expenses 282 ------------------------------------------------------------------- Reclassification of exceptional items (loss on disposal) (26) Increase in impairment of assets held for sale (2) (2) -------------------------------------------------------------------- Increase in exceptional items (28) -------------------------------------------------------------------- -------------------------------------------------------------------- Impact of taxation changes (4) 13 -------------------------------------------------------------------- -------------------------------------------------------------------- Reported profit for the period under IFRS 1,243 -------------------------------------------------------------------- (9) IAS 19 - 'Employee benefits' - employee benefit accruals Under UK GAAP, FRS 12 (provisions,contingent liabilities and contingent assets)allowed for varying practical implementation and the Group did not previously make a provision for holiday pay. IAS 19 requires that when emplyees provide a service to a company, the estimated ammount that will be paid in exchange for these services should be recognised. Under IFRS,at 2 July 2006,the Company recognised an accural of £88,000 for employee benefits in respect of holiday pay,which reversed out in the period to 30 December 2006 as the Group's holiday year ends in December. (10) Restatement of cash flow statement from UK GAAP to IFRS The reconciling items between the UK GAAP presentation and the IFRS presentation have no net impact on the cash flows generated, however the IFRS cash flow statement is presented in a different format from that required under UK GAAP,with re-categorisation of cash flows across operatingactivities, investing activities and financing activities. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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