RNS Number:0361I
Springhealth Leisure PLC
27 February 2003
27 February 2003
SPRINGHEALTH LEISURE PLC
PRELIMINARY RESULTS FOR THE YEAR TO
31 AUGUST 2002
SpringHealth Leisure plc, the operator of mid-market health and fitness clubs,
announces preliminary results for the year ended 31 August 2002.
* Turnover up 6.4% to #12.5m (2001: #11.75m)
* Like for like membership increased by 6.6% over the year to 24,200 (2001:
22,700 restated)
* Operating profits (before goodwill amortisation and exceptional items) at
#278,000 (2001: #991,000)
* Loss before tax (before goodwill amortisation and exceptional items) at
#258,000 (2001: Profit #508,000)
* Agreement reached in principle to sell two clubs for #2.6m in cash with
the proceeds being applied to the reduction of debt. Exchange of contracts
is expected within the next few weeks
* Impairment provision of #483,000 on two under-performing units
Sandy Anderson, Chairman, commented:
"The restructuring of the health and fitness marketplace supports our view that
our positioning as an affordable, mid-market product offers the best prospects
for the future. At the individual club level, the effect of new competition
opening within the catchments of some of our clubs has had some impact,
particularly in the second half. In this more competitive market, we have
focussed on reducing our overall level of debt and consequently have reached
agreement in principle to sell two of our clubs. It is expected that these
disposals will be finalised within the next few weeks. Until we are more
confident of the economic conditions, we will continue our focus on increasing
the profitability of each of the clubs through local marketing."
Sandy Anderson
Chairman
27 February 2003
Enquiries to: John Lowther, Chief Executive 07710 601563
SpringHealth Leisure plc
Simon Rothschild/Tarquin Edwards 0207 929 5599
Holborn
SPRINGHEALTH LEISURE PLC
PRELIMINARY RESULTS FOR THE YEAR TO
31 AUGUST 2002
Chairman's and Chief Executive's Review
The Company's focus during the year has been to continue to improve the strength
of the business to compete effectively through a programme of refurbishment at
four of the clubs, upgrading gym equipment at twelve of the clubs and improving
standards of customer service. This policy is already proving successful. The
major refurbishment at Kingston Park was completed and relaunched at the end of
February 2002. Although the club suffered five months of disruption that
impacted short-term profitability, this refurbishment has enabled the club to
increase membership, despite new competition opening within its catchment area.
Similarly, at Low Fell, a modernisation programme has successfully led to an
increase in membership. Nevertheless, this strategy has had a short-term impact
on earnings and cash flow
Market conditions have become increasingly competitive over the course of the
last year. At the local level, new club openings have had an impact on existing
clubs with overlapping catchments, whilst the re-structuring of some of the
larger operators has, in some cases, led to more aggressive marketing campaigns.
We have revised our marketing tactics accordingly and have also undertaken a
review of the cost base of the business and brought down variable costs where
necessary.
Results
Turnover for the fourteen clubs for the year to 31 August 2002 grew by 6.4% to
#12.5m (2001: #11.75m.) Costs, arising from the refurbishment programme during
the first half and the more competitive trading conditions in the second half,
depressed earnings before interest, tax and depreciation ("EBITDA") and
exceptional items to #1,414,000 (2001: #1,877,000, before exceptional items).
Operating profit before goodwill amortisation and exceptional items was #278,000
(2001: profit: #991,000) and the loss before tax, goodwill amortisation and
exceptional items was #258,000 (2001: profit: #508,000).
In the light of the performance at two of the trading units during the year and
the Company's expectations of their profitability in future, the Board has
concluded that there has been an impairment to the carrying value of the
tangible and intangible fixed assets and consequently has made a provision of
#483,000.
Like for like membership numbers at the 14 clubs operating at year-end were up
6.6% over the year to 24,200 from 22,700 (restated) at 31 August 2001.
The Board is not recommending that a dividend is paid in respect of the year
under review.
Recent Action to Reduce Debt Level
Since the year-end, the Board has focussed its attention on reducing the Group's
level of debt significantly, while at the same time minimising the impact on
pre-tax earnings. Accordingly, we have conditionally agreed to the sale of two
units for #2.6m in cash. The net assets of the clubs to be sold (including an
allocation of goodwill) are approximately #5.2m and the operating profit
attributable to the clubs, before allocation of certain central costs, was
approximately #162,000 for the year ended 31 August 2002. Once completed, the
effect of these disposals will be to bring down gearing to 30%.
The Board considers the sale of these assets to be a prudent move as this will
allow the Company to repay debt with a fixed coupon of 7%, and consequently,
annualised pre-tax earnings, based on the above results, will not be affected in
the short term.
Current trading and prospects
Through SpringHealth's positioning as a 'Good Value' provider of mid-market
health club operations, the Board have always recognised the need to be
competitive on price and provide attractive facilities to a very broad age range
of members including facilities for social and community use. The Company has
spare capacity within the existing portfolio and our prime focus will continue
to be on maximising the efficiency of our operations and marketing to increase
profitability.
The Board's decision to sell certain operations and significantly reduce the
Company's gearing will put the Company in a stronger financial position given
the highly competitive market conditions which have continued into the current
year.
Sandy Anderson John Lowther
Chairman Chief Executive
27 February 2003
Consolidated Profit & Loss Account for the year ended 31 August 2002
Audited Audited
Year ended Year ended
31 August 2002 31 August 2001
#'000 #'000
Turnover 12,509 11,753
Administrative expenses (13,579) (11,892)
Operating (loss)/profit before exceptional items (587) 187
Exceptional items (483) (326)
Operating Loss (1,070) (139)
Loss on disposal of fixed assets (3) (7)
Loss on ordinary activities before interest (1,073) (146)
Interest receivable 44 131
Interest payable & similar charges (580) (614)
Loss on ordinary activities before taxation (1,609) (629)
Tax on loss on ordinary activities 6 -
Loss for the period (1,603) (629)
Loss per share
Basic (pence) (10.88) (4.53)
Diluted (pence) (10.88) (4.53)
Consolidated Balance Sheet at 31 August 2002
Audited at Audited at
31 August 2002 31 August 2001
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 14,695 15,920
Tangible assets 12,270 11,392
26,965 27,312
Current Assets
Stocks 94 92
Debtors 577 452
Cash at bank & in hand 443 2,615
1,114 3,159
Creditors: Amounts falling due within one year (4,013) (2,927)
Net current (liabilities)/assets (2,899) 232
Total assets less current liabilities 24,066 27,544
Creditors: Amounts falling due after more than
one year (5,659) (7,542)
Provisions for liabilities and charges
Deferred tax (108) (100)
18,299 19,902
Capital & reserves
Called up share capital 1,473 1,473
Share premium account 15,721 15,721
Merger reserve 5,600 5,600
Profit & loss account (4,495) (2,892)
Equity shareholders' funds 18,299 19,902
Reconciliation of movements in shareholders' funds
2002 2001
#'000 #'000
Loss for the year (1,603) (629)
Issue of Shares - 13,877
Net change in Shareholders' Funds (1,603) 13,248
Opening Shareholders' Funds 19,902 6,654
Closing Shareholders' Funds 18,299 19,902
Consolidated Cashflow Statement for the year ended 31 August 2002
Audited Audited
Year ended Year ended
31 August 2002 31 August 2001
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 902 2,814
Returns on investments & servicing of finance
Interest received 44 131
Interest paid (580) (614)
Net cash outflow from returns on investments &
servicing of finance (536) (483)
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,143) (2,094)
Sale of tangible fixed assets 3 4
Net cash outflow from capital expenditure and
financial investment (2,140) (2,090)
Acquisitions and disposals
Purchase of subsidiary undertaking - (3,222)
Net cash acquired with subsidiary undertaking - (312)
Net cash outflow from acquisitions and disposals - (3,534)
Net cash outflow before financing (1,774) (3,293)
Financing
Issue of ordinary share capital - 7,877
Repayment of loans (331) (1,834)
Capital element of finance lease rental payments (67) (253)
Net cash (outflow)/inflow from financing (398) 5,790
(Decrease)/increase in Cash (2,172) 2,497
NOTES
1. The financial information contained in this announcement does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The financial information for the year ended 31 August 2001 and 31
August 2002 has been extracted from the statutory accounts for those years and
which contain unqualified auditors reports. The accounts for 2001 have been
filed with the Registrar of Companies and those for 2002 will be filed before 31
March 2003.
2. The accounting policies used to prepare the financial
information contained in this statement are consistent with those set out in the
statutory accounts for the year ended 31 August 2001 and are in accordance with
applicable accounting standards. The ability of the Group to meet its current
financing obligations is dependent upon obtaining longer term finance or the
sale of assets. Further details of the Directors' activities and plans to
achieve this are set out in the Chairman's and Chief Executive's review. At
present, while recognising that some uncertainty exists, the Directors' believe
that the Group will be in a position to reduce its short term debt and
accordingly have prepared the financial statements on the going concern basis.
3. Turnover and operating loss all relate to continuing operations
carried out in the UK.
4. The Board is not recommending that a dividend is paid in respect of
the year under review.
5. The Loss per Ordinary Share has been calculated using the weighted
average number of Shares in issue during the relevant financial periods. The
weighted average number of Equity Shares in issue was 14,731,536 (2000 -
13,868,296) and the loss after tax was #1,603,000 (2001 - Loss #629,000).
6. Reconciliation of operating loss to net cash inflow from operating
activities:
2002 2001
#'000 #'000
Operating loss (after exceptional items) (1,070) (139)
Depreciation 1,136 886
Amortisation of intangible assets 865 804
Impairment of fixed assets 483 -
Increase in stocks (2) (33)
(Increase)/decrease in debtors (111) 502
(Decrease)/increase in creditors (399) 794
Net cash inflow from operating activities 902 2,814
7. Reconciliation of net cash flow to movements in net debt
2002 2001
#'000 #'000
(Decrease)/increase in cash (2,172) 2,497
Finance leases acquired with subsidiary - (340)
New loans - (6,650)
Loan payments during the year 331 1,834
Finance lease payments during the year 67 253
Movement in net debt in the year (1,774) (2,406)
Net debt at 1 September 2001 (5,536) ( 3,130)
Balance at 31 August 2002 (7,310) (5,536)
Analysis of changes in net debt
2001 Cash Flow Other 2002
non-cash
transactions
#'000 #'000 #'000 #'000
Cash at bank and in hand 2,615 (2,172) - 443
Debt due after one year (7,298) - 2,063 (5,235)
Debt due within one year (311) 331 (2,063) (2,043)
Finance leases (542) 67 - (475)
(5,536) (1,774) - (7,310)
8. The annual report and accounts for the year ended 31 August 2002 will
be sent to all shareholders in due course and copies will be available from the
Company's registered office at 42-46 High Street, Esher, Surrey KT10 9QY.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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