RNS Number:6480N
Honeycombe Leisure PLC
17 July 2003
Thursday, 17 July 2003
HONEYCOMBE LEISURE PLC
AUDITED PRELIMINARY RESULTS 2003
Amendment to Preliminary Results for the year ended 27 April 2003
The Company announced its unaudited preliminary statement of results for the
year to 27 April 2003 on 1 July 2003. Following discussions between the
Directors, the Audit Committee and the Company's auditors Baker Tilly, certain
income and costs have been reclassified as detailed below. The changes have no
material impact on the underlying financial position of the Company.
* Prior period adjustments will be made to the 2002 and prior period
financial statements totalling #822,809 (net of tax). The administration cost
exceptional charge in the year ended 27 April 2003 will be reduced as a result
from #1,596,846 to #610,057.
* #707,986 of income relating to profit on disposal of surplus
non-trading assets, which was classified in Turnover and Other Operating Income
is to be classified as Profit on Sale of Fixed Assets. Administration costs
have been reduced by #60,000, with a corresponding reduction in the profit on
sale of fixed assets.
The effect of these changes are that Turnover and Other Operating Income for the
year ended 27 April 2003 will be reduced by #707,986 to #32,971,147, Operating
Profit will increase from #3,192,722 to #3,531,525, Profit Before Taxation will
increase from #1,591,289 to #2,578,078 and Profit after taxation will increase
from #1,154,708 to #1,936,247.
The Company's basic and diluted earnings per share will increase from 3.9 pence
to 6.6 pence and the adjusted basic earnings per share will decrease from 4.3
pence, as restated, to 3.8 pence.
The preliminary announcement of results to 27 April 2003 has been amended to
reflect these changes and is reproduced below.
AUDITED PRELIMINARY RESULTS 2003
HIGHLIGHTS
* Turnover up 1.6 % to #32.97m (2002 as restated: #32.45m)
* Like for like sales increase of 4.3% across period
* Adjusted operating profit up 1.9% to #4.57m (2002 as restated: #4.49m)
* Adjusted profit after tax decreased by 10% to #1.1m (2002 as restated:
#1.25m)
* Adjusted EPS decreased by 11% to 3.8p (2002 as restated: 4.3p)
* Gearing significantly reduced to 194% (2002 as restated: 305%)
* Board pleased to recommend a final dividend up 5% to 2.2p giving a total
of 3.1p for the year (2002: 2.95p)
* Nectar yielding above-target returns with full investment planned this
year
Sandy Anderson, Chairman, commented:
"The Board believes that good progress has been made in the year. We have seen
a pleasing increase in profits, allied to a substantial reduction in gearing and
and we have established ourselves at the forefront of what we believe will
become an increasing industry trend towards the separation of ownership and
management of pub assets.
"The continued state of flux in our industry will provide many more
opportunities for us to manage a much larger portfolio of pubs. We believe that
our strategy provides a sustainable and developing model for a rapidly changing
sector."
Enquiries to:
James Baer, Bryan Wardman,
(Joint Chief Executives)
Honeycombe Leisure PLC Tel: 01772 329 100/102
Paul Snape (Finance Director)
Honeycombe Leisure PLC Tel: 01772 329 120
Tarquin Edwards/Chris Steele
Holborn Tel: 020 7929 5599
Chairman's Statement
Against a background of volatile market conditions for the industry, I am
pleased to report both an increase in profits and a significant reduction in the
level of gearing.
Our strategy for operating unbranded sites, trading away from the intense
competitiveness of the High Street, has delivered a healthy 4.3% increase in
like for like sales and both Trading Divisions have contributed to an increase
in site profitability.
Developing management income streams from pubs that others own, whilst retaining
a strong core estate of our own, is a strategy, which seeks to capitalise on our
proven skills and regional knowledge, allied to our management expertise in
running mid market unbranded sites. Major pub owners are now looking beyond the
traditional tenanted pub as they seek to increase both the size and quality of
their estates. Our track record and managed house infrastructure means that we
are well placed to negotiate further management deals as the pub industry
continues to develop and restructure.
In February, we announced the sale of twelve freehold units to Punch Taverns Plc
for #11.72m. At the same time we entered into a 20 year agreement with Punch to
continue to manage the sites. The transaction with Punch has helped to
substantially reduce Honeycombe's bank borrowings but, more importantly, it has
established a relationship with the UK's second largest pub operator, providing
a template whereby Honeycombe can grow its estate. We are currently
investigating new potential acquisitions with Punch.
Honeycombe's management contract with Nectar Taverns Plc, which was set up last
year to acquire and run managed houses, now has eight freehold units, with
offers accepted on a further two, which are still subject to contract. The
existing trading units continue to yield returns above targeted levels. Nectar
is planning to reach full investment of its #11m facility by the end of the new
financial year and this will generate a significant level of management fees in
the current and future years.
Following the sale of the sites to Punch which were at above book value, we took
the opportunity to make some individual property disposals. We received proceeds
of #1.5m for three sites which had between them made little site contribution.
The overall net profit from the sale of trading assets was #1.15m.
The Honeycombe estate at the year end was professionally valued by independent
valuers. I am pleased to report that the valuation, undertaken in a difficult
market environment, fully supports the existing site book values. The total of
the individual valuations was #3.4m above previous valuations. The portfolio
valuation that includes a "lotting premium" has not been reflected in the
accounts, but would have yielded a surplus of #2.5m on book value.
Included within the exceptional charge of #0.61m, there are a number of items
which the Directors felt it prudent to provide. The major item relates to the
company's one remaining non trading asset being the old Devonshire office, which
in the current uncertain property market, remains unsold. The Directors have
therefore been prudent in making an exceptional charge to profit of #300,000 for
this asset.
Gearing in the year reduced from 305% on 28 April 2002, as restated, to 194% on
27 April 2003. We are currently discussing improved banking terms with the Bank
of Scotland which will allow us to make future selective freehold acquisitions.
We continue to benefit from the tax losses within the Devonshire Group and no
tax will be payable for the year. The charge of #641,831 relates largely to
movement on Deferred Tax. This benefit will continue into the current year.
Dividend
The Board is recommending a final dividend of 2.2p per ordinary share, to be
paid on 17 October 2003 to shareholders on the register on 1 August 2003.This
gives a total dividend for the year of 3.1p (2002:2.95p), an increase of 5%.
Operational Review
Aided by the World Cup which created a good start for the year, we were able to
maintain positive like for like sales during all periods for both bar and food
income.
Bar and food margins have held steady and we have maintained a clear pricing
policy without resorting to heavy discounting. Future improvements in margins
are expected from a recent renegotiation of our wines and spirits contract and
change of main food supplier.
Costs continue to be managed carefully, but legislation changes have contributed
to an increased level of personnel and security costs, whilst we had to absorb
an extra #100,000 of insurance costs, which reflect the sector wide increase in
premiums. We are pleased that despite these additional cost burdens, site
operating margins have held steady at 23.2%.
The considerable improvements made in previous periods have left the bulk of the
estate in good condition, but we have undertaken a number of selective capital
improvements during the year. In a competitive market, the customer demands
quality and value and we have sought to provide this environment, whilst keeping
many site refurbishments to a modest cost. We have successfully converted two
further sites to our proven Last Orders concept, which provides a consistently
good value drinks offer plus actively promoted and managed Big Screen Sport.
Management Contracts
Whilst the number of new property acquisitions on behalf of Nectar Taverns Plc
was initially slow, there has been a rapid acceleration in the last quarter and
the trading performance of the units has been above the targeted level of
expectation.
A considerable amount of preliminary work has been done with Punch Taverns and
we are confident that deals will be struck on a number of new units in the near
future.
We have also approached other major pub owners with a view to future management
contracts.
We continue to explore further opportunities with Jarvis following the success
of our Manchester student bar agreement.
People
I would like to place on record my appreciation of the service of my colleagues,
at all levels, who continue to demonstrate their commitment to the successful
development of the business.
Licensing Reform and Disability Discrimination Act
Licensing Reform provides opportunities as well as challenges and we are well
prepared to tackle the extra administration that this will bring. We have set up
an 'in house' team to manage the transitional process which is likely to begin
early next year and we are reviewing all our existing licenses to ensure our
businnesses have the optimum operating hours.
Disability Discrimination Act audits are being carried out by our estates team
to ensure that we balance our legal obligations with the commercial opportunity
and costs of this work.
Current Trading
Our like for like sales for the first eight weeks of the new year are neutral,
which on a comparative basis with the World Cup period last year, is
encouraging. During May, we were pleased to note that when there was no World
Cup factor, like for like sales increased by 3.7%.
Prospects
The Board believes that good progress has been made in the year. We have seen a
pleasing increase in profits, allied to a substantial reduction in gearing and
and we have established ourselves at the forefront of what we believe will
become an increasing industry trend towards the separation of ownership and
management of pub assets.
The continued state of flux in our industry will provide many more opportunities
for us to manage a much larger portfolio of pubs. We believe that our strategy
provides a sustainable and developing model for a rapidly changing sector.
Sandy Anderson
17 July 2003
Consolidated Profit and Loss Account
Year To Year To Year To Year To
27 April 2003 27 April 2003 28 April 2002 28 April 2002
Restated Restated
# # # #
Turnover and Other 32,971,147 32,451,688
Operating Income
Cost of Sales -exceptional - (66,000)
-other (20,034,012) (19,636,680)
(20,034,012) (19,702,680)
Gross Profit 12,937,135 12,749,008
Distribution Costs (418,649) (327,552)
Administration Costs -exceptional (610,057) (487,059)
-other (7,944,904) (7,998,345)
(8,554,961) (8,485,404)
Amortisation of (432,000) (422,948)
Goodwill
Operating Profit 3,531,525 3,513,104
Profit/(Loss) on 1,857,433 (276,207)
disposal of fixed
assets
Interest Receivable - 44,467
Interest Payable (2,810,880) (2,908,998)
Profit Before Taxation 2,578,078 372,366
Taxation (641,831) (376,873)
Profit/(loss) After Tax 1,936,247 (4,507)
Dividends (937,995) (847,780)
Retained Profit /
(Loss) 998,252 (852,287)
Earnings / (loss) per Basic 6.6p (0.1p)
share
Diluted 6.6p (0.1p)
Adjusted Basic 3.8p 4.3p
Adjusted Earnings per share is calculated by adding back the amortisation of
goodwill, exceptional items and deducting the profit on disposal of fixed assets
Group Balance Sheet
Year ended Year ended Year ended Year ended
27 April 2003 27 April 2003 28 April 2002 28 April 2002
Restated Restated
# # # #
Fixed Assets
Intangible assets 7,099,762 7,531,772
Tangible assets 44,749,094 56,332,503
51,848,856 63,864,275
Current Assets
Stocks 941,329 841,112
Debtors 1,309,720 1,498,517
Cash at bank and in hand 1,833,963 2,810,543
4,085,012 5,150,172
Creditors: amounts falling due (9,401,330) (13,376,833)
within one year
Net current liabilities (5,316,318) (8,226,661)
Total assets less current 46,532,538 55,637,614
liabilities
Creditors: amounts falling due (28,049,858) (39,188,236)
after more than one year
Provisions for liabilities and (2,285,385) (1,817,932)
charges
16,197,295 14,631,446
Capital and Reserves
Called up share capital 296,443 287,383
Share premium account 16,073,967 15,515,430
Profit and loss account (173,115) (1,171,367)
Equity shareholders' funds 16,197,295 14,631,446
Cash Flow Statement
Year to Year to Year to Year to
27 April 2003 27 April 2003 28 April 2002 28 April 2002
# #
Operating profit 3,531,525 3,513,104
Depreciation and amortisation 1,544,523 1,419,292
Working capital movement (337,851) 696,611
Net cash inflow from operating
activities 4,738,187 5,629,007
Returns on investments and servicing
of finance (2,972,274) (3,579,011)
Taxation - -
1,765,913 2,049,996
Capital expenditure
Payments to acquire tangible fixed (2,126,446) (3,014,619)
assets
Receipts from sale of tangible fixed
assets 14,203,597 6,648,032
12,077,151 3,633,413
Acquisitions and disposals - (1,500,000)
Equity dividends paid (1,007,499) (700,874)
Net cash outflow before financing 12,835,565 3,482,535
Financing
Issue of share capital 598,000 -
Share issue costs (30,403) -
New loans 2,803,493 -
Repayment of loans (14,807,451) (5,000,000)
Capital element of finance leases (108,538) (71,721)
(11,544,899) (5,071,721)
Increase/(decrease) in cash 1,290,666 (1,589,186)
Cash Flow Statement (continued)
Reconciliation of net cash flow to Year to Year to
movement in net debt 27 April 2003 28 April 2002
Increase/(decrease) in cash 1,290,666 (1,589,186)
Cash flows from changes in debt and 12,112,496 6,571,721
lease financing
Change in net debt resulting from 13,403,162 4,982,535
cash flows
Non-cash changes (205,596) (224,879)
Movement in net debt 13,197,566 4,757,656
Net debt at 28 April 2002 (44,569,238) (49,326,894)
Net debt at 27 April 2003 (31,371,672) (44,569,238)
Earnings Per Share Workings
Earnings per share is calculated as follows:
Year to Year to
27 April 2003 28 April 2002
Basic
Profit/(loss) after taxation - #'000s 1,936 (4)
Weighted average number of shares in issue - number 29,412,875 28,738,308
Basic earnings / (loss) per share - pence 6.6p (0.1p)
Diluted
Profit after taxation - #'000s 1,936 (4)
Weighted average number of shares in issue - number 29,424,733 28,769,531
Diluted earnings / (loss) per share - pence 6.6p (0.1p)
Adjusted
Profit after taxation after adjusting for amortisation of
goodwill, exceptional items, profit/(loss) on sale of assets 1,121 1,248
Adjusted earnings per share - pence 3.8p 4.3p
Notes
1. General
The revised preliminary financial statements for the twelve months ended
27 April 2003 were approved by the board of directors on 16 July 2003.
The preliminary financial information set out above does not constitute full
accounts within the meaning of Section 254 of the Companies Act 1985.
The preliminary announcement has been prepared on the basis of the accounting
policies set out in the statutory accounts to 28 April 2002.
Copies of the Report & Accounts will be sent to shareholders shortly.
2. Prior period adjustments
Following a review, the Directors now consider that it was inappropriate to
recognise certain income in the accounts for the year ended 28 April 2002. Bad
and doubtful debt provisions against trade debtors and insurance claims should
also have been made. In addition, a number of other individually small items
were identified relating to asset write offs and unaccrued liabilities. These
errors have been corrected by making a prior period adjustment of #564,662 (net
of tax) for the year to 28 April 2002 and #258,147 (net of tax)for prior
periods.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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