Preliminary Results

All Leisure group plc

Preliminary results for the year ended 31 October 2011

Financial Highlights

·; Operating profits before gains and losses on certain derivative financial instruments for the financial year increased by £0.3 million to £3.4 million (2010: £3.1 million) after one-off items, as highlighted in the pre-close statement published on 28 November 2011

·; Full year pre-tax profit of £5.7 million (2010: full year loss of £2.1 million)

·; Underlying operating profit of £2.6 million (2010: underlying operating loss of £2.0 million)

·; Final dividend of 1.31p per share (2010: 1.31p)

·; Business backed by net assets of £32.5 million (2010: £28.0 million)

Operational Highlights

·; The core brands of Voyages of Discovery, Swan Hellenic and Hebridean Island Cruises provided a 7.1% increase in passenger nights for the year ended 2011 compared to 2010

·; Continued operational excellence as indicated by on-board customer surveys revealing that over 9 out of 10 passengers would travel with All Leisure again

·; Discover Egypt remaining profitable despite the effects of 'Arab Spring' uprising

·; Summer 2012 ocean cruising capacity increased 15% albeit with sales down 7% on this time last year but selling price is up for Voyages of Discovery and Swan Hellenic by 4% and 11% respectively.

Strategy

·; Consistent strategy: to achieve growth by exploiting the increasing demand for destination-led cruise holidays and by providing an increasing choice of other niche holiday products into the over-55 English speaking market.

Commenting on the results the Chairman Roger Allard said

"The fact that we have increased profitability at an underlying trading level against a backdrop of unprecedented natural disasters and geo-political events pays testament to the strength of our brands and the dedication of our loyal staff. Whilst we remain cautious on the overall economic outlook, we have taken some prudent action to ensure that we are best placed to continue to provide the best service possible to our customers and value to shareholders alike."

For further information:

All Leisure group plc

Chairman's Statement

Against a backdrop of unprecedented natural disasters and geo-political events, and despite challenging market conditions, reduced discretionary customer spending, persistent low interest rates, increased oil prices and a weak Pound, I am able to announce that the Group has delivered a reasonable performance.

Results

Despite a 7.1% increase in passenger nights giving rise to higher revenues for the three cruise brands (Voyages of Discovery, Swan Hellenic and Hebridean Island Cruises), revenues declined by 2.8% to £80.36m (2010: £82.61m), the decline was as a result of mv Alexander von Humboldt charter issues detailed below, coupled with the impact of the Arab Spring on Discover Egypt.

Operating profits before gains and losses on certain derivative financial instruments for the financial year increased by £0.29m to £3.38m (2010: £3.09m profit), although this year's result has been impacted by the one-off items which are noted below. The current year unadjusted operating profit has increased to £5.32m (2010: loss of £2.40m) with the favourable movement being due to a £7.43m swing in the mark to market adjustments related to the valuation of certain derivative items used for hedging purposes. Overall, this resulted in Group profit being £5.68m (2010: £2.07m loss).

2010/11 final dividend

On 29 July 2011, the Board proposed to maintain the interim dividend at 0.64p per share. The Board is now proposing a final dividend of 1.31p per share (FY2010: 1.31p) to be paid on Tuesday 1 May 2012 to shareholders on the register as at 11 April 2012, resulting in a full year FY2011 dividend of 1.95p per share (FY2010: 1.95p). This dividend is paid in recognition of the strong underlying asset-backed, brand value and customer loyalty of the business, along with confidence in the long term future of the Group.

Review of Performance

As noted, this operating result includes several one-off items that have had both a favourable and a detrimental impact on the year under review, which, when are taken into account, result in our underlying operating profit being £2.61m (2010: a loss of £1.95m) including the effects of unrealised gains and losses on certain derivative financial instruments or £0.67m (2010: a profit of £3.54m) excluding them. (See Finance Director's Report for further details).

As noted in the announcement dated 17 October, the Group's main trading subsidiary, All Leisure Holidays Limited ("All Leisure Holidays"), was successful in its claim against the underwriters of the passenger protection insurance provided to customers who booked cruises with Hebridean Island Cruises Limited ("HICL") prior to HICL going into administration. The Court ruled in All Leisure Holidays' favour on all accounts and awarded the full amount claimed. The amount, £1.86m, included within other income is shown net of unrecoverable legal costs incurred fighting the case.

Secondly, All Leisure Holidays received sums totalling £1.60m from insurers in respect of a number of technical issues that had affected two ships within the Group's fleet in previous financial years. This sum includes payments on account, rather than full settlements, for certain claims and therefore management remains optimistic that further sums may be recovered. Such additional sums have not been recognised in these results.

Regrettably I also have to report a significant one off cost that the Group has had to bear, which arose from the bareboat charter of mv Alexander von Humboldt to a third party operator. We have taken the prudent decision to provide for costs arising from a contractual arrangement of £0.75m. This matter is addressed in further detail in note 3 to the financial statements, however in brief this liability has arisen due to the charterer not paying for services ordered and delivered to the ship; accordingly, the suppliers are now seeking recompense from the Group. Having sought legal opinion, management remain of the view that these claims are unjustified, particularly when the charterer is still trading, however it is probable that funds will need to be paid to the courts or, alternatively, directly to the suppliers, to withdraw these claims. In addition to these costs the Group did not achieve the expected revenue from this charter. Whilst it is very disappointing to incur such costs, they are indicative of the incredibly difficult current economic and geo-political environment all companies within the travel industry have to endure.

Dividend policy

The Directors reiterate that they intend to continue a policy which, subject to satisfactory trading and having regard to prevailing circumstances and opportunities, will provide for the distribution of a proportion of the consolidated profit after tax of the Group, whilst continuing to retain the balance of the Group's earnings to facilitate the Board's strategy for the continued growth of the Group.

Strategy

The Group's strategy remains unchanged, namely to achieve growth by exploiting the increasing demand for destination-led cruise holidays and by providing an increasing choice of other niche holiday products into the over-55 English speaking market.

The Directors believe that the Group's chosen niche markets have a number of fundamental attractions:

·; Significant barriers to entry. The Directors believe that a growing focus by regulators on safety and consumer protection is raising the barriers to entry for those wishing to enter the Group's markets. This is benefiting established brands with strong balance sheets.

·; High levels of repeat business. The Group has again enjoyed significant repeat passenger business during the year, underlining the benefits of customer loyalty.

·; Strong revenue visibility. Despite a trend towards later booking in recent months, the Group enjoys significant forward visibility on its cruise bookings compared with other package holiday products. Cruises go on sale more than twelve months prior to departure and the Group generally achieves two thirds of expected bookings before the season commences.

·; An attractive tax regime. The mv Discovery, mv Minerva, mv Alexander von Humboldt and mv Hebridean Princess all qualify for taxation under the UK tonnage tax regime. As a result, the Directors expect the Group tax rate to be lower than the current level of UK corporation tax for the foreseeable future.

In addition, the Group has other considerable strengths:

·; Well established brands. Swan Hellenic was established in 1954, Hebridean Island Cruises in 1988, Voyages of Discovery was established in 1994 and Discover Egypt in 1999. By virtue of their history, we believe that all four brands represent trusted names, generating significant customer loyalty in their niche markets, both in the UK and overseas.

·; Operational excellence. On-board surveys of ocean cruise passenger attitudes reveal that nine out of ten of last year's passengers surveyed intend to cruise with the Group in the future.

·; A committed and experienced management team. The Board and two other senior executives together own 74 per cent of the shares in issue. The management team brings a wide range of complementary experience from both inside and outside the travel industry.

·; Strong asset backing. The Group owns three freehold properties as well as the ships mv Discovery, mv Hebridean Princess and mv Alexander von Humboldt. All assets are clear of any outstanding debt. Independent valuations of the Group's fleet are significantly higher than current book value.

·; Significant balance sheet liquidity. The Group has no debt and ended the financial year with unrestricted cash (including advanced customer receipts) of £6.7m (2010: £15.1m) primarily due to a combination of fleet investment, the effects of withdrawing mv Minerva for Winter 2011/12 on advanced customer deposits and Discover Egypt.

Set out in note 14 are details of the Group's principal risks and uncertainties together with examples of the Group's mitigating activities concerning those risks and uncertainties.

Senior management changes

Further to the resignation of Guy Marchant and subsequent appointment of Neil Morris noted in my statement for the year ended 2010, during the year Ross Jobber, the Group's Chief Operating Officer, announced he would be returning to work in the City and resigned on 8 April 2011. On behalf of the Board I would like to thank Ross for his contribution as both Chief Operating Officer for the Group and, preceding that appointment, as a Non-executive Director and wish him the best for his new role.

Other departures, at All Leisure Holidays Limited, included Dudley Smith (retired) and Mark Jeffries (resigned) I would like to thank both of them for their contribution to All Leisure Holidays Limited over the years. Jos Dewing and Nigel Cressey were appointed to the Board of All Leisure Holidays Limited having worked within the Group for a number of years and I would like to congratulate them both on their promotions.

Operational review and plans for 2012

As per my announcement of 29 November, winter trading is extremely challenging, with a growing trend towards late bookings.

We have taken the strategic decision to manage our capacity and plan significant dry docks, refits, maintenance and upgrades during 2012. In addition, we will continue to develop new routes to market, for example via GDS and on-line to broaden customers' options and product offerings.

As part of these plans, we have taken mv Minerva out of service (as of 23 November in Sharm El Sheikh) to carry out a major refit and substantial upgrade in Bremerhaven, Germany. This upgrade will include, but is not limited to, adding 32 balconies, enlarging some cabins, upgrading bathrooms, adding an observation lounge, and will include a substantial technical upgrade which will not only enhance the customer experience but make the vessel greener and more efficient. mv Minerva will therefore be out of service for over 3 months, recommencing operations in March this year. The majority of this work is being paid for by the vessel's owner and will cost in the region of €14 million. In return for these improvements, we have extended the lease for a further 8 years to November 2021 at the same lease rate. We have also agreed to assist the owner's financing of these improvements by paying an additional deposit of up to €2 million; this deposit will be recovered by way of non-payment of lease rentals at the end of the lease term. These improvements should benefit our yield and bottom line for the year ending October 2013 and beyond. We are delighted to say that we are seeing some benefits being delivered for this summer, with per diem fares 11% higher than those for Summer 2011. As a result of mv Minerva being out of service for the majority of the winter season, understandably winter losses will be higher than those for 2010/11, although we are investing for, and should reap the benefits over the next 10 years.

mv Discovery is operating in the Middle and Far East and Australia this Winter and, due to the challenging trading conditions, we expect revenues and occupancy to be lower than last year. However, per diem fares are 4% up on those achieved at the same point last year for Summer 2011.

Sales of Hebridean Princess are slower than last year, although per diems are being maintained. However, the inaugural river cruise programme is already over 75% sold.

mv Alexander Von Humboldt, soon to be renamed mv Voyager and to come under the Voyages of Discovery brand from next Winter, will have further upgrades made to it following a summer charter. Overall, summer 2012 ocean cruising capacity has increased by some 15% and, at this point, sales are down 7% compared to this time last year, reflecting the growing trend towards later bookings.

With regards to Discover Egypt, understandably due to the ongoing political situation, sales are down significantly on prior year albeit the brand remains profitable with very little risk on committed flying or ground costs.

Outlook

In summary, and as already stated, we are currently encountering many challenges as a result of geo-political events, difficult market conditions, inflation and the situation in the Eurozone, together with the tragic events seen recently in Giglio, Italy. Nevertheless, the fact that we have reported a reasonable performance against a backdrop of unprecedented natural disasters and geo-political events pays testament to the strength of our brands and the dedication of our loyal staff. Whilst we remain cautious on the overall economic outlook, we have taken some prudent action to ensure that we are best placed to continue to provide the best service possible to our customers and value to shareholders alike.

R J Allard

Chairman

All Leisure group plc

Chief Executive's Report

Operating Review

The following table provides current and historical key performance indicators ('KPI's) employed by the Group:

Other operating data

The following table provides the current and historical figures for the principal operating KPIs employed by the Group:

Notes:

(i) Calculated as the total passengers carried multiplied by the total number of revenue sailing days. Excludes Discover Egypt passengers and passengers carried on mv Alexander von Humboldt charters for 2010 and 2011.

(ii) Excludes passengers carried on the mv Alexander von Humboldt charters for 2010 and 2011.

(iii) Excludes mv Alexander von Humboldt and unrealised gains and losses on fuel hedges.

Cruise:

Voyages of Discovery

Voyages of Discovery offers niche year-round destination-led cruises on board the mv Discovery which appeal to mature customers and include a wide variety of itineraries worldwide. For the financial year 2010/11 mv Discovery (20,216 gross tonnes, 356 cabins and offers a maximum of 708 lower berths) operated for 365 cruise nights, compared to 351 in the prior year, and increased the number of ALBNs by 1.9% due to not having to undergo a scheduled dry dock. This resulted in cruise revenues (excluding onboard and other) increasing by 0.6% albeit the achieved fare per diem reduced by 1.27% as a result of increased capacity over the winter season (due to there being no dry dock) and market pressures on passenger fares.

Sales are generated through a number of sources. Cruises sold in the UK are generally sold directly to the public or on the Group's behalf by specific travel agents with an expertise in the cruise market. The direct sales to the public are either to repeat customers of the Group or generated through passenger referrals, advertising and other promotions. In the US and Canada cruises are sold via the Group's Fort Lauderdale sales office and across the rest of the English speaking world, via the Group's arrangements with general sales agents in the Netherlands, Australia, and New Zealand.

From November 2012, the Voyages of Discovery brand's fleet will be augmented by the addition of the mv Alexander von Humboldt, to be renamed mv Voyager, with the inaugural cruise taking place in November 2012. mv Discovery will undergo an extended dry dock over the winter 2012/2013 period, returning to sail from March 2013.

Swan Hellenic

Swan Hellenic also offers niche year-round destination-led cruises on the mv Minerva (gross tonnage of 12,449 tonnes and has 197 cabins offering a maximum of 394 lower berths), which has its unique 'country house' style. Swan Hellenic also offers a limited summer programme of destination-led river cruises on Europe's major rivers onboard river cruisers chartered from A-ROSA.

For the financial year 2010/11, cruise nights increased by 7.7% to 365 days and ALBNs also by 7.7% as a result of the vessel having no unscheduled dry docks as experienced in previous years. This resulted in cruise revenue increasing by 7.1% over that for 2009/10, albeit the achieved fare per diem decreased by 11.3% as a result of significantly increased winter capacity and market pressures on fare increases.

For Winter 2011/12, we have taken the opportunity to take Swan Hellenic's leased vessel, mv Minerva, out of service to carry out a major refit and substantial upgrade in Germany. This upgrade will include adding 32 balconies, enlarging some cabins, upgrading bathrooms, adding an observation lounge and a substantial technical upgrade. As a result the vessel will be out of service for over 3 months, recommencing operations in March this year. The majority of this work is being paid for by the vessel's owner and will cost in the region of €14 million.

Hebridean Island Cruises

The Hebridean Princess is a five star vessel weighing 2,112 gross tonnes and has 30 cabins offering a maximum of 50 lower berths. The ship operates principally from Oban between March and November and offers a range of cruises primarily around the Scottish Islands and Highland coastline, although it also sails to other countries in the British Isles and, in the summer of 2011, also sailed to France for the first time, docking at a number of ports in Normandy and Brittany. For the financial year ended 31 October 2011, mv Hebridean Princess operated for a further two cruise nights than for financial year 2009/10, however ALBNs fell by 9.87%. This reduction was due to not only the number of available lower berths increasing by 1 from 49 to 50 for the 2010/11 financial year but also the significant upgrade of certain cabins that meant that all now had en-suite facilities, thus removing lower cost entry level cabins. Despite this reduction in ALBNs, both revenue and achieved fare per diem increased by 22.0% and 35.4% respectively. Last, but not least, subsequent to the year end, Hebridean Princess received a Royal Household Warrant, the first ship to receive such an honour.

mv Alexander Von Humboldt ("AvH")

Following the acquisition of the AvH in November 2009, the opportunity was taken to expand the schedule of works undertaken whilst in wet dock this winter to increase the number of balcony cabins on the vessel from 10 to 30. In addition we converted a number of other areas into cabins, resulting in the ship now having 278 cabins (30 balconies) compared with 260 previously (10 balconies).

Whilst this has resulted in the overall investment in the vessel increasing to €26m, the investment made has increased the open market value of the ship in excess of the costs of improvement and the AvH now has a third party valuation of €35m compared to the valuation of €25m as at 31 October 2010.

This investment was met from the Group's existing cash resources and the vessel was subsequently chartered to a Turkish tour operator between April and November 2011. Regrettably, and as noted in the Chairman's statement and note 3 to the financial statements, this charter has turned sour resulting in provisions totaling £0.8m being incurred this financial year and the Group not achieving the expected level of revenue from this contract. The vessel will be chartered to a third party operator for the Summer 2012 season, subject to successful ongoing negotiations, prior to joining the Voyages of Discovery brand as mv Voyager in November 2012.

Operations

Consistent with the Board's policy, the delivery of services on board mv Discovery, mv Minerva and mv Alexander von Humboldt is mainly outsourced but is strategically, technically and commercially controlled by the senior management of the Company in the UK. There are two main suppliers for services on board the vessels, V Ships and Sea Chefs. V Ships Leisure employs the deck and engine crew responsible for the ships' maintenance, mechanical operations and health and safety. Sea Chefs employs the hotel, catering and spa staff. Harding Brothers Limited are responsible for the operation of the onboard shop. Celtic Marine (Guernsey) Limited, on behalf of All Leisure Holidays Limited, employs 15 key staff on mv Discovery and up to 38 on Hebridean Princess including the captains and chief engineers. Ship and crew management for Hebridean Princess is provided by Andrew Weir Shipping and Viking Recruitment respectively.

Tour operating:

Discover Egypt

In recent years Discover Egypt has seen a greater propensity for bespoke two centre holidays which have been sold at a higher margin than the traditional one week Nile cruise and as a result, it has managed to diversify away from traditional one week cruises. However, and understandably in view of the situation in Egypt following the 'Arab Spring' uprising and ongoing resultant unrest, revenue is down considerably this financial year, a fall of 32.8% and passengers carried have fallen by 37.6%. All Leisure Holidays is operating a limited programme this Winter and is pleased that for our committed aviation capacity to Luxor, sales to the end of 30 April 2012 are over 90%. As in the past, we have no financial commitment on the ground and have not contracted any aviation capacity for Summer 2012.

Bearing in mind all the upheavals in Egypt, we are satisfied with current trading.

R D Bryant

Chief Executive

All Leisure group plc

Finance Director's Report

Results:

I am able to announce that the Group has been able to deliver a profit for the financial year of £5.7m compared to a loss of £2.1m for the year ended 31 October 2010 despite the challenges facing the travel industry as a whole. However, and as noted in the Chairman's Statement, this result has been achieved with the benefit, and impact, of several significant 'one off' items, as described in notes 6 and 7; accordingly, the table below will reconcile the reported result for the current and prior year to the underlying trading performance:

The reduction in adjusted profit for the year of £2.9m, or 81%, can be largely attributed to the following: 1) the increasing cost of fuel (as demonstrated by the KPIs listed in the Operating Review); 2) the charter of the AvH not being as profitable as that for 2010 and 3) the pressure on achievable fare prices in view of market conditions and consumer confidence. Revised market expectations for the Group of an EBIT of £2.5m took into account the receipt of the insurance monies but excluded the damages awarded and the provision arising from costs incurred during the charter of mv Alexander von Humbolt due to the operator seeking protection from its creditors of £0.8m; therefore, once these are taken into consideration, the Group's result is broadly in line with market expectations, with the shortfall being due to the increase in the provision by £0.2m compared to the £0.6m announced in the trading update of the 29 November 2011. The Group endeavours to manage its cost base through the use of derivative financial instruments for foreign currencies (US dollars and Euros) and fuel however in view of the uncertain market conditions, all costs and arrangements are under review to ensure that the best deal possible is achieved from key suppliers. To assist in these aims, the Group is looking to consolidate further, where possible, Group functions and is also investing in a new procurement system which will be rolled out imminently. To sustain customer revenues, the Group is investing in all its cruising brands, as outlined previously, as well as developing new routes to market, particularly via GDS and on-line to broaden the customer's options and make it easier to book one of the Group's product offerings, whether this be a cruise or a supplementary excursion.

Currency and fuel management

In order to maintain an active currency management strategy the Group employs a variety of derivative financial instruments of varying complexity. These help the Group to achieve its budgeted exchange rates which are often higher than market rates, albeit with risks that often differ from those of a vanilla forward contract. The majority of the Group's currency requirements for FY2011 were covered by derivative contracts and in addition the Group has similar arrangements in place to cover the majority of its requirements for the year ahead. Given that most of the derivatives used by the Group do not qualify for hedge accounting, the Group has chosen to value all of its derivatives at fair value through the profit or loss.

As at the balance sheet date of 31 October 2011, the net mark-to-market valuation of these derivative positions was a liability of £1.0m, compared with £3.0m as at 31 October 2010. Such figures are significant, particularly within the context of the Group's current level of profitability, however it is important to put these accounting definitions into a commercial context.

Firstly the value of our foreign exchange and fuel hedges (which are non-cash accounting items) vary significantly over time. Secondly, in order to deliver currency to the Group at rates at or above the budgeted rate used to price our product, the Group generally holds derivatives to maturity irrespective of fluctuations in their mark to market valuation. Thirdly, as predominantly over-the-counter instruments, the Group has extensive experience of further managing its currency purchases by revising contract terms as market conditions change. For these reasons the Board is confident that the current hedging strategy is correct despite any costs that may from time to time be reflected in the Group income statement, and any potential obligation to buy foreign currency in quantities that might exceed the Group's short term requirements.

Capital expenditure

The Group has again invested heavily in its fleet this year, firstly in the further significant upgrade of mv Alexander von Humboldt, and secondly in the annual routine dry dock for and mv Hebridean Princess. In respect of mv Alexander von Humboldt, and as noted in the Operating Review above, the opportunity was taken to increase the number of balcony cabins on the vessel from 10 to 30. In addition, a number of other areas were converted into cabins, resulting in the ship now having 278 cabins (30 balconies) compared with 260 previously (10 balconies).

In respect of the mv Hebridean Princess, and as noted in the Operating Review, the Group upgraded two cabins and increased the available number of lower berths to 50, improvements which helped deliver a significant increase in the per diem fare achieved on this vessel. The Group has also taken the opportunity to invest in IT (reflected by additions to intangible asset and plant, property and equipment totalling £0.5m) as part of its strategy to reduce ongoing operating costs through better efficiencies and also improve its platform to deliver its product to the market. In total, capital expenditure for the year ended 31 October 2011 totalled £9.3m, demonstrating management's commitment to investing in the Group's products and infrastructure despite the challenging and uncertain economic environment.

Looking forward, the mv Hebridean Princess is undergoing her annual dry dock this winter, which will cost an estimated £0.8m, and of course there is the major upgrade of the mv Minerva, which we are partially funding through an increased deposit as detailed in the Chairman's Statement. As the Minerva is a leased vessel, the vast majority of the expenditure is being paid for by the owner although the Group is still responsible for meeting the costs of the dry dock work required to meet class, for which a provision of £1.5m (2010: £1.5m) has been included in the balance sheet.

Cash flows

Primarily due to a combination of the cessation of Swan Hellenic's operations for Winter 2011/12 to allow for the upgrades to mv Minerva to take place and challenging winter trading for the Group's only operating brands (Voyages of Discovery and Discover Egypt), net cash flows from operating activities have decreased by £13.8m compared to 2010 resulting in a net cash outflow of £0.7m for the year ended 31 October 2011.

Total cash and balances at bank at the year-end amounted to £7.2m (2010: £18.1m), of which £6.7m (2010: £9.5m) is classified as cash and cash equivalents, £0.5m (2010: £3.0m) classified as restricted cash, and £nil (2010: £5.6m) as interest bearing bank deposits. The Group has immediate access to all of these balances, other than the amounts reported as restricted cash. Customer deposits at 31 October 2011 amounted to £13.4m (2010: £19.1m).

Of significance to cash flow during the year were: capital expenditure, which included the additions described above of £9.3m, release of the restricted guarantee for mv Minerva of £2.6m, outflows from working capital movements of £9.6m and a dividend payment of £1.2m.

Going concern

The Group ended the year with net assets of £32.5m (2010: £28.0m), net current liabilities of £13.4m (2010: £14.4m) and total cash of £7.2m (2010: £18.1m). In addition, and as per the prior year balance sheet, the Group has no borrowings and excess facilities available to it.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out above and in the statements of the Chairman and Chief Executive, detailing the challenging trading environment the Group faces at present.

In view of the trading environment, coupled with the reduction in liquid resources available to the Group, the Directors have prepared a forecast for the business for 24 months from the balance sheet date to 31 October 2013 taking into account key assumptions about future trading performance and their plans for the Group. This forecast also includes variances to take into account events that may not materialise in line with expectations. The results show that the Group will continue to have sufficient cash resources over this period.

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

N J Morris

Group Finance Director

All Leisure group plc

Consolidated Income Statement

For the year ended 31 October 2011

There were no discontinued operations during the year.

All results are attributable to equity holders of the parent Company.

The presentation of the prior year income statement has changed from that presented in the financial statements for the year ended 31 October 2010; please refer to note 2 for further details.

All Leisure group plc

Consolidated Statement of Comprehensive Income

For the year ended 31 October 2011

All Leisure group plc

Consolidated Statement of Changes in Equity

At 31 October 2011

Revaluation reserve: the property revaluation reserve represents the revaluation of Lynnem House, 1 Victoria Way, Burgess Hill, West Sussex, and Discovery Mews, Copthorne, Surrey which were revalued at open market value with vacant possession as at 31 October 2009 in the sum of £700,000 by an external valuer, Stiles Harold Williams and £400,000 by an external valuer, Hamptons International, respectively.

Following a review by the directors at 31 October 2011 of both property values based on current market conditions it has been concluded that no material change has occurred in the carrying values of either property.

Currency translation reserve: At 31 October 2011 one of the Group's subsidiary companies has a US$ functional currency and the translation reserve represents the exchange gains and losses arising on the retranslation of the net assets of this subsidiary entity.

The US$219,000 movement in 2010's currency translation reserve related to the change of the functional currency of Discovery Cruises Limited on 1 November 2010 from US dollars to sterling.

All Leisure group plc

Consolidated Balance Sheet

At 31 October 2011

The financial statements of All Leisure group plc, registered number 01609517, were approved by the Board of directors and authorised for issue on 25 January 2012. 

They were signed on its behalf by:

N J Morris

Director

All Leisure group plc

Consolidated Cash Flow Statement

For the year ended 31 October 2011

1. Financial information

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 October 2011 or 31 October 2010, but is derived from those accounts. Statutory accounts for the year ended 31 October 2010 have been delivered to the Registrar of Companies and those for the year ended 31 October 2011 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in January 2012.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below. The financial statements have been prepared on a going concern basis. The responsibility statement below has been prepared in

connection with the Company's full annual report for the year ended 31 October 2011. Certain parts thereof are not included within this announcement. We confirm to the best of our knowledge:

- The financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

- The management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face.

The responsibility statement was approved by the board of directors on 25 January 2012 and is signed on its behalf by:

Roger Allard - Executive Chairman

Neil Morris - Group Finance Director

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis as discussed in the Financial Director's Report and Corporate Governance Statement.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 October each year. Control is achieved when the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

All subsidiaries are 100% owned and there are no non-controlling interests in the Group.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the IFRS policies used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisition of a subsidiary undertaking or a business undertaking is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.

Foreign exchange

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the Group's foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Property, ships, plant and equipment

Property, ships, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment in value.

Depreciation

Depreciation is provided on all property, dry docks, ship improvements and plant and equipment, other than freehold land, at rates calculated to write off the cost or revalued amount, less estimated residual value of each asset evenly over its expected useful life, as follows:

The carrying values of property, ships, plant and equipment are reviewed at least annually for impairment or if events or changes in circumstances indicate the carrying value may not be recoverable.

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Further details regarding the residual values of the cruise ships is provided in note 3 to the financial statements.

Costs relating to mandatory cruise ship dry docks are capitalised and depreciated over the period up to the next dry dock where appropriate.

Land and buildings held for administrative purposes are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Freehold property was last revalued in October 2009.

Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties' revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties' revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to income. On the subsequent sale of a revalued property, the attributable revaluation surplus remaining in the properties' revaluation reserve is transferred directly to retained earnings.

Investment property

Investment property, which is property held to earn rentals, is stated at deemed cost as the Group elected, under the transitional arrangements available under IFRS 1, to use the previous carrying value under UK GAAP as deemed cost on transition to IFRS. The investment property is depreciated on a straight-line basis at 2% per annum. The land on which it is situated is not depreciated.

Intangible assets

Intangible assets with a finite useful life are carried at cost less amortisation and any impairment losses. Intangible assets represent items which meet the recognition criteria of IAS 38, "Intangible Assets". Amortisation of intangible assets is calculated over the following periods:

Impairment of tangible and intangible assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet at fair value when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', the Group's financial assets are classified into the following specified categories:

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Currently the Group does not have any financial assets that are classified as 'held to maturity' or 'available-for-sale', as defined by IAS 39.

Loans and receivables

Loans and other receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. These assets are carried at amortised cost using the effective interest method, if the time value of money is significant, less any provision for impairment. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired. This category of financial asset includes trade receivables.

Financial assets at FVTPL

Financial assets at FVTPL are measured at fair value after initial recognition with any gains or losses arising being included in the consolidated income statement. In respect of the Group, financial assets at FVTPL can include the Group's fuel and foreign currency derivatives with their fair value being determined by external valuers using market data (please refer to note 3 for further details).

Bank balances and cash in hand

Restricted cash comprises cash deposits which have restrictions governing their use and are classified as current or non-current dependent on the remaining length of the restriction, which is determined from contractual terms governing the restriction. Cash and cash equivalents comprise cash in hand, cash held in banks accounts with no access restrictions and bank or money market deposits repayable on demand or maturing within three months of inception. If the bank or money market deposits have an original maturity of three months or more these are disclosed as 'interest bearing bank deposits' outside cash and cash equivalents. This reflects the contractual terms of the deposit agreements such that whilst the Group often has immediate access to the bank deposits, the counterparty has the right to restrict interest payments in the event of early withdrawal. Interest income on these balances is recognised using the effective interest method.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been reduced.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, an appropriate portion of the loss previously recognised is reversed.

De-recognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or financial liabilities measured at amortised cost.

Financial liabilities at amortised cost

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. This category of financial liabilities includes trade payables, accruals, deferred income and borrowings.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. The Group has not designated any financial liabilities as being at FVTPL and accordingly only holds financial instruments in this category that are deemed to be held for trading under the provisions of IAS 39.

With respect to the Group, the financial liabilities that can be classified as financial liabilities that are held for trading are the derivative instruments that are not designated and effective as hedging instruments (see the derivative accounting policy below).

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

De-recognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Derivative financial instruments

The Group's activities expose it primarily to the financial risks of changes in foreign exchange rates and changes in the price of fuel for the ships. Derivative financial instruments are used by the Group to mitigate its exposure to movements in currency exchange rates and movements in the price of fuel.

The majority of the Group's derivatives do not meet the hedge classification criteria of IAS 39. The Group has chosen to measure all its derivatives at fair value through profit and loss, with the movement being disclosed on the face of the income statement.

Derivative financial instruments are measured at fair value as described above.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share capital and share premium account

There is one class of shares. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium account. Incremental external costs directly attributable to the issue of new shares are recorded in equity as a deduction, net of tax, in the share premium account.

Dividends

Dividends are provided for in the period in which they become a binding liability on the Company.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Inventories

Inventories representing engineering spares, fuels and lubricants are stated at the lower of cost (being purchase price to the Group) and net realisable value.

Where necessary, provision is made for obsolete and damaged stocks.

Leases

Leases taken by the Group are assessed individually as to whether they are finance leases or operating leases.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease rental payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The benefit of any lease incentives is spread over the term of the lease.

All Group leases (which include Bareboat Charter agreements) are classified as operating leases.

Taxation

The tax expense represents the sum of current tax expense and deferred tax expense.

Current tax expense is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Certain of the Group subsidiary companies are subject to taxation under the UK Tonnage Tax regime. Under this regime, a shipping company may elect to have its taxable profits computed by reference to the net tonnage of each of the qualifying ships it operates.

Deferred tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for accounting purposes. Deferred tax balances are not significant to the Group due to the majority of the operations being within the tonnage tax regime, or taxed on a basis equivalent to the accounting basis.

Where relevant, deferred tax is measured at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based upon tax rates and legislation that have been enacted or substantively enacted at that balance sheet date. Deferred tax is charged or credited to the income statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.

Share-based payment

The Group issued equity-settled share-based payments to its former NOMAD in the year ended 31 October 2007 and issued equity-settled share-based payments to directors in the year ended 31 October 2009. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) of the equity instruments at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments was expensed immediately as the options vested on grant. The fair value excludes the effect of non market-based vesting conditions.

Fair value is measured by use of the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

On the basis that both schemes are immaterial to the financial statements, the full disclosure requirements of IFRS 2, 'Share based payment' have not been included.

Revenue recognition

Revenue comprises sales to third parties (excluding VAT and similar sales, port and other taxes). Cruise revenues and cruise charter revenues, together with revenues from onboard and other activities, which include transportation and shore excursion revenues, are recognised in income for each day of the cruise as it progresses. Discover Egypt revenue is recognised over the period of the tour package.

Client monies received at the balance sheet date relating to holidays commencing after the year end are deferred and included within trade and other payables.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Retirement benefit costs

The Group operates a defined contribution pension scheme. The amount charged to the income statement in respect of pension costs and other post-retirement benefits is the contributions payable in the year.

Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

Operating profit

Operating profit is stated before investment income and finance costs.

Analysis of the income statement by nature or function

In prior financial years, the Group choose to present the analysis of its costs in the income statement by function to the business. However, following an evaluation of financial statements prepared by industry peers, it was decided to change the presentation method to one by nature. Accordingly, the prior year comparatives have been restated from their presentation in the 2010 audited financial statements. A reconciliation of the 2010 comparatives to operating profit under both methodologies is presented below (italics denotes prior year presentation approach):

3. Critical accounting judgements and key sources of estimates uncertainty

In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group's accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

Residual value of cruise ships

As in the prior year, the residual value of the Group's cruise ships is measured on the basis of either an operating cruise ship or scrap value at the current projected end of its useful life to the Group. In the cases where it is planned to dispose of the ship as a working vessel, the estimate of the residual value reflects independent specialist advice received by the Company from a member of the Institute of Chartered Ship Brokers, relating to the current value of the vessels coupled with the likelydisposal value of the ship at the projected end of the useful life to the Group. For information, the current valuations, provided by these independent specialists, for mv Alexander von Humboldt and mv Discovery are €35m 9as of April 2011) and US$28m (as of November 2011) respectively. If it is assumed the ship will be scrapped, the residual value is based on external market data for the scrap value of steel. Ship residual values are determined in US Dollars and are therefore subject to foreign exchange risk.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Valuation of derivative financial instruments

The Group has significant derivative assets and liabilities on balance sheet as at 31 October 2010 and 31 October 2011, which are carried at fair value as required by IAS 39, Financial instruments: Recognition and Measurement. The fair value is reported in the income statement and creates volatility in reported results. The Group uses external consultants who are engaged to professionally value the Group's derivatives. The Group believes that the derivative market value at the year end is based on appropriate estimates. The Group notes though that the valuation of derivative financial instruments requires significant estimates, primarily:

Dry dock provisions

The bareboat charter agreement for mv Minerva establishes certain minimum return conditions on the vessel at the end of the agreement. To the extent that these are considered unavoidable, the Group records a provision for the best estimate of the expected expenditure to be incurred, with a corresponding asset recorded. The asset is depreciated to the date that the work is planned to be completed. The estimation of the provision requires significant judgment, and has inherent uncertainties relating to the cost of the work to be completed. Further, the liability will be settled principally in Euros and is carried in a US Dollar functional currency entity. Accordingly, the level of the liability at Group level is subject to both fluctuations in value between the US Dollar and Euro exchange rate, and the Euro and £ sterling exchange rate. However, as the dry-dock is scheduled to occur in February 2012, as at the date of approval of the financial statements management have a far better understanding of the likely final costs of the works to be performed and this is not materially different to the amount recognised at the balance sheet date.

Impairment of Swan Hellenic

The Group has completed a detailed impairment review of the assets in the Swan Hellenic cash generating unit (CGU) due to the loss in this CGU during the year ended 31 October 2011.

The Swan Hellenic brand is currently used for cruises on the mv Minerva. Following extensive negotiations with the owner and a plan to improve and modernise the vessel, the lease on this ship has been extended to 2021.

The recoverable amount assumes that from this date cruises under this brand will take place on a replacement vessel. In determining the recoverable amount, the Group has used the following principal inputs:

The Group prepares cash flow forecasts derived from the most recent financial budgets for the next five years and calculates a terminal value for periods thereafter. These assumptions have been revised in the year in light of the current economic environment. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market and the ship on which the brand operates. It is anticipated that sales volumes will increase over the next year as the economic recovery gathers pace and the demand for cruise holidays increases.

Based on this review, which concluded that the value in use is higher than the net book value of the CGU, the Group is satisfied that the assets of Swan Hellenic are not impaired at the balance sheet date. The Directors note that the assumptions made in preparing the impairment review have a significant impact on the recoverable amount of the CGU, and actual events may differ materially from expectation.

Provision arising from a contractual arrangement 

During the year the Group chartered AvH to a third party tour operator. The tour operator failed to pay a number of suppliers from whom they had ordered goods and services from that had been supplied to the vessel. Under maritime law, it is possible for to make claims against the owner of a ship under certain circumstances. Having sought legal advice, and based on management's understanding of maritime law, given the charterer has not gone into administration it has been advised that the Group can defend these claims through due legal process or via direct liaison with the suppliers in question. As yet, no decision has been made on which approach will be best for the Group however both will involve the outflow of cash, as taking the legal route would entail the funds being held in escrow by the court until an adjudication is made in the Group's favour, or not, as the case may be. The provision has been calculated based on the full amount owed to the suppliers in question with an additional allowance made for legal costs incurred and to be incurred. Depending on future decisions made by the court or negotiations with suppliers, the outcome of which is uncertain and beyond management's control, there is uncertainty as to whether the provision reflects accurately the future outflows. For operational reasons, it is necessary for the Group to ensure the claims are withdrawn in early 2012 and therefore there will be a definite cash outflow within 12 months of the balance sheet date. However, should management decide to take the court route for settlement, it may be the case that the courts make a decision which could, assuming a favourable outcome for the Group, result in the Group recovering all or some of the money that would be held in escrow by the court.

4. Revenue

An analysis of the Group's revenue is as follows:

Ancillary services revenue included within sales of cruise holiday and ancillary services includes all revenue derived directly from the cruise holidays sold, other than the principal cruise. Ancillary services revenue includes excursions revenue, on board revenue such as bar, laundry and other, and insurance income. None of these revenue streams account for more than 10% of the overall revenue and are considered by the Directors to be a component of the overall revenues derived on cruises.

5. Business and geographical segments

The Group has identified that each of its brands is an operating segment and that these operating segments meet the criteria to be aggregated into the two reporting segments: Cruising and Tour Operating.

Reporting segment revenues and results

The Group is currently organised into two reporting segments as follows:

Cruising: This is the Group's largest reporting segment and includes the cruise operating segments. Revenue streams are principally from the UK but also from the USA and rest of the world.

Tour operating: This segment represents the Group's Discover Egypt operation, providing holidays in Egypt to the UK market.

The Group holds all its derivative contracts to maturity and for this reason, coupled with being unable to hedge account under IAS 39, the information on these instruments is reported separately to the chief operating decision maker. Furthermore, these movements are not allocated to any one reporting segment in the management accounts. As a consequence the information is presented below with an adjustment that reconciles the operating profit on an IFRS basis, which includes the mark-to-market impact of the Group's open derivative financial instruments.

Information about these businesses is presented below:

Segment assets

The unallocated corporate assets primarily relate to certain cash balances and group properties.

Segment liabilities

Other segment information

Geographical segments

The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services:

6. Other income

Insurance claims

The insurance claims amount relates to the settlement of insurance claims made in respect of technical matters experienced on ships operated by the Group based on past events.

Damages awarded

The damages awarded arose from the Company's success against the insurers underwriting the financial failure insurance provided to passengers of Hebridean Island Cruises Limited ("HICL"), a policy which was designed to indemnify the passengers in respect of any net ascertained financial loss sustained from cancellation / curtailment of their travel arrangements as a result of insolvency. This matter was disclosed in 'Key sources of estimation uncertainty' in the prior year signed financial statements and is referred to in more detail in the Chairman's Statement and the Finance Director's Report.

The Insurers refused to pay out under the policy because the Company operated identical replacement cruises for the passengers at no extra cost. In September 2009, the passengers formally assigned their claims under the Policy to the Company and in March 2010, the Company's solicitors issued a claim on behalf of the Company in the Commercial Court ("the Court").

The Court ruled in the Company's favour on all accounts and awarded the Company the full amount claimed. The amount presented above is shown net of insignificant unrecoverable legal costs incurred.

7. Operating profit/(loss)

Provision arising from a contractual arrangement

This item arises as a result of losses incurred, or anticipated to be incurred, from the bareboat charter of mv Alexander von Humboldt to a third party. Please refer to note 3 for further details.

Volcano impact

In the prior financial year, following the eruption of the Eyjafjallajokull volcano in Iceland in April 2010, there was a period of closure of UK and European airspace. The Group attributed specific costs to this airspace closure. These comprised £446,000 of incremental costs that were principally hotel and meal costs for stranded inbound and outbound customers and the cost of repatriation of inbound customers. They also included £137,000 of marketing costs related to cruises which did not sail.

8. Tax (credit)/charge

a) Tax (credit)/charge on profit/(loss)

(b) Factors affecting the tax (credit)/charge for the year

The tax assessed for the year differs from that resulting from applying the standard rate of corporation tax in the UK of 26.8% (2010 - 28.0%). The differences are explained below:

Factors affecting the tax (credit)/charge for the year (continued)

For accounting periods beginning on or after 1 January 2000 a shipping company or group may elect to have its taxable profits computed by reference to the net tonnage of each qualifying ship it operates subject to meeting various conditions. Accordingly, the majority of the Group's profits are not subject to taxation under the normal corporation tax regime. This results in a significant reduction in the taxation liability of the Group, reflected above in the income taxed under tonnage tax regime line item.

Deferred tax

Due to the majority of the Group's trading subsidiary companies being within the tonnage tax regime, the Group has no significant deferred tax assets or liabilities as at 31 October 2011or 2010. Under this regime, the relevant subsidiary companies are taxed on the basis of the tonnage of the vessels under operation, rather than the profit before taxation.

At the balance sheet date, the Group has unutilised trading losses of £10.3 million (2010: £10.2 million) available for offset against future profits. No deferred tax asset has been recognised in respect of the trading losses due to the majority of the Group being taxed within the tonnage tax regime.

9. Dividends

The interim dividend of £395,000 was payable to shareholders on the register on 14 October 2011 and was paid on 11 November 2011. Interim dividends only become binding liabilities on the Company when declared as paid and accordingly, the interim dividend in respect of financial year 2010/11 has not been included as a liability in these financial statements.

The proposed final dividend of £809,000 is subject to approval by shareholders at the Annual General Meeting and has also not been included as a liability in these financial statements.

10. Earnings/(loss) per share

The calculation of the basic and diluted earnings/(loss) per share is based on the following data:

All results derive from continuing operations and accordingly total earnings/(loss) per share and earnings per share from continuing operations are the same.

11. Derivative financial instruments

12. Notes to the cash flow statement

13. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other related parties are disclosed below:

Trading transactions

During the year, Group companies entered into the following transactions with related parties who are not members of the Group:

Roger Allard Limited is a company owned and controlled by Mr R J Allard a director of the Company and majority shareholder of the Group and the payments made are for consultancy services.

PB Consultancy services is owned and controlled by Mr P E Buckley the Company Secretary of the Group and the payments are for consultancy, accounting and Company Secretarial services.

Light Blue Travel Limited is a company of which Mr R J Allard is a director and shareholder and the payments made are for travel services.

Remuneration of key management personnel

The remuneration of the Directors of the Company and subsidiary company directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. 

14. Principal risks and uncertainties

The Directors continually identify, evaluate and manage material risks and uncertainties faced by the Group which could adversely affect the Group's business, operating results and financial position. The list below details what the Directors consider to be the principal risks and uncertainties and the actions taken, or to be taken, to mitigate potential adverse consequences. This list is not intended to be exhaustive and other risks may emerge over time: