RNS Number:9881C
Arena Leisure PLC
23 December 1999
ARENA LEISURE PLC
Graham Parr/ Ian Penrose
Arena Leisure Plc 01342 833 058
Charles Wilkinson / David Marks
Deutsche Bank 0171 885 2500
John Bick / Damion Greef
Holborn Public Relations 0171 929 5599
john_bick@holbornpr.co.uk
damion_greef@holbornpr.co.uk
Not for release, publication or distribution in or into the
United States, Canada, Australia or Japan
ACQUISITION OF THE WINDSOR GROUP, NOTICE OF
EXTRAORDINARY GENERAL MEETING AND INTERIM RESULTS
INTRODUCTION
Arena Leisure announces today that it has entered into a conditional agreement
to acquire the Windsor Group which owns and operates Royal Windsor Racecourse.
In view of the relative size of the Acquisition, it is subject to approval by
Shareholders and a circular, convening an Extraordinary General Meeting, will
be despatched to Shareholders in due course. The Company has also announced
today its interim results for the 6 months to 30 September 1999, which are
summarised below.
The total Consideration payable in respect of the Acquisition is #13.56
million (calculated with reference to the closing price of the Ordinary Shares
on 22 December 1999). This will be satisfied by a cash payment of #10 million
and by the issue of 2,777,778 Consideration Shares to the Vendors. The
Consideration Shares will be issued credited as fully paid and will rank pari
passu with the existing Ordinary Shares in all respects. The #10 million cash
element of the consideration will be satisfied from the net proceeds of the
Cash Placing which was announced on 3 December 1999 with the balance being
satisfied through additional borrowings to be provided under the terms of a
new Facility Agreement.
INFORMATION ON THE WINDSOR GROUP
The Windsor Group owns and operates Royal Windsor Racecourse which currently
stages 22 flat fixtures each year and offers a balance of both modern and
traditional racing facilities to cater for all the requirements of the race-
going public. Set in 167 acres of Berkshire countryside, adjacent to the
River Thames, this prestigious racecourse has built its reputation on a series
of popular Monday evening race meetings throughout the summer. These meetings
have proved to be very popular with corporate customers, social visitors and
regular race-goers alike.
In the year ended 31 December 1998, the Windsor Group reported an aggregated
profit before taxation, of #588,000. At 31 December 1998 the aggregated net
assets of the Windsor Group were #9.6 million including the Windsor Group's
167 acres of freehold land which was carried in its balance sheet at an
existing use value of #8.25 million.
The Acquisition is expected earnings enhancing in the year ending 31 March
2001, the first full year of trading.
BACKGROUND TO AND REASONS FOR THE ACQUISITION
It is the Board's stated intention that Arena Leisure should be a leader in
the process of the consolidation of the UK horseracing industry. Its
acquisition of Wolverhampton and Southwell racecourses earlier this year was a
significant step in this regard. The Directors believe that the Acquisition
of Royal Windsor Racecourse is another major step in accordance with this
strategy. It will result in Arena staging approximately 18 per cent. of all
UK horseracing fixtures.
The Acquisition of Royal Windsor Racecourse will help to reduce the
seasonality of the Arena Leisure business, as Royal Windsor's summer fixtures
will provide a balance to the predominantly winter orientated business at
Arena Leisure's four existing racecourses. Royal Windsor is a well known and
respected racecourse which will raise Arena Leisure's profile in the racing
industry. In addition, the increased scale and quality of Arena Leisure's
racing interests resulting from the Acquisition will further enhance its
negotiating position for the valuable television and other media (including
internet) revenues which are and may become available.
BACKGROUND ON ARENA LEISURE
Arena Leisure is the UK's second largest owner and operator of racecourses in
terms of numbers of fixtures and courses (the largest being The Racecourse
Holdings Trust, a subsidiary of the Jockey Club). Following completion of the
Acquisition, Arena will own five racecourses: Lingfield Park, Folkestone,
Wolverhampton, Southwell and Royal Windsor. The enhanced portfolio will allow
Arena Leisure to offer a comprehensive range of flat and national hunt
fixtures on the turf, whilst also providing the only three all-weather
racecourses in the UK. The portfolio includes the only floodlit racecourse in
the UK, at Wolverhampton.
Arena Leisure also owns and operates significant property and leisure assets
including a 54 bedroom hotel adjacent to the Wolverhampton racecourse, two 18
hole golf courses at Lingfield and Southwell and the Lingfield Health and
Squash Club. In addition to these trading assets, the Board continues to work
closely with the local planning authorities at both Folkestone and Lingfield
to derive value from surplus land at both locations.
The Board is focused on maximising Arena Leisure's revenues from television
and other media. The Board of Arena Leisure is confident it has identified a
significant revenue generating opportunity in the business of online gaming
and is in the process of developing an internet site which aims to broadcast
live pictures of horseracing alongside on-line betting facilities.
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
HIGHLIGHTS
- Turnover increased by 22% to #5,114,000 (1998 -
#4,171,000);
- Underlying operating profit up 37% to #373,000 (1998 -
#273,000);
- Announcement of acquisition of Royal Windsor Racecourse,
subject to Shareholder approval, for #13.56 million; and
- Successful integration of Wolverhampton and Southwell
racecourses.
CHAIRMAN'S STATEMENT
INTRODUCTION
The six months ended 30 September 1999 have seen significant improvements in
the development of your company.
Your company continues to establish itself as a leading driver of the
consolidation and change currently taking place in the horseracing industry,
and I am delighted to be able to announce today the acquisition of Royal
Windsor Racecourse, subject to shareholder approval, for a total consideration
of #13.56 million.
Your Board remains convinced that by owning a strong and balanced portfolio of
racecourses it will be best positioned to maximise Arena's future revenues
from the valuable television and media rights associated with UK horseracing.
On completion of the Acquisition, Arena Leisure will stage approximately 18
per cent. of all UK horseracing fixtures.
FINANCIAL
The unaudited interim results for the six months ended 30 September 1999 show
a 22% increase in turnover to #5,114,000 (1998 - #4,171,000). Whilst headline
operating profit has fallen from #453,000 to #277,000, the underlying
operating profit of the business has shown a healthy year on year increase.
The corresponding period last year benefited from a fixture transfer that
yielded profit before tax of #180,000. The Wolverhampton and Southwell
acquisitions completed on 26 July 1999, incurred operating losses and goodwill
amortisation of #96,000 and a further #78,000 in associated interest costs in
the two months ended 30 September 1999 in line with budget but highlighting
the seasonality of the business.
Subsequent to 30 September 1999, we have raised a total of #1 million
(#950,000 from the sale of the Faringford Hotel, together with a further
#50,000 from the sale of our sporting premium rate telephone business),
generating a total gain on sale of #133,000 from these two disposals.
Earnings per ordinary share on the increased average number of shares in issue
was 0.02p (1998 - 0.16p).
The acquisition of R.A.M. Racing Leisure Limited, owner of Wolverhampton and
Southwell racecourses, for #16 million was completed on 26 July 1999.
Consideration payable was #13 million in cash and #3 million in Ordinary
Shares of 5p each in Arena Leisure Plc. The cash element was funded by way of
a 1 for 4 Rights Issue at 15p and from new bank facilities. Net debt at the
half year totalled #14,994,000, representing gearing of 60% on net assets
amounting to #24,923,000.
DIVIDEND
As indicated previously, it is not the Board's intention to pay a dividend for
the six months ended 30 September 1999 or for either of the two years ended 31
March 2000 and 31 March 2001, as the Company's priority is to invest in the
long-term growth of its business.
OPERATIONAL REVIEW
The principal developments over the period have centred on the acquisition and
integration of Wolverhampton and Southwell racecourses, which have now been
successfully completed.
Lingfield continues to invest in its facilities, with the new champagne and
seafood courtyard in particular, proving to be extremely popular.
Furthermore, we have acquired the Lingfield Health and Squash Club for
#375,000. This freehold property, owned by Arena Leisure was previously
leased out under a long-term arrangement. This acquisition unifies the
estate, and offers a number of alternative possibilities as we look to improve
the facilities and benefit from the development of property surplus to the
core racing activities.
At Folkestone we have managed to successfully bring the catering in-house by
deploying Arena Leisure's own staff from Lingfield, thereby conferring
operational benefits at the racecourse.
Your Board has invested in putting together a management team, at both main
Board and operational levels, to deliver your Company's stated strategic aims.
This will facilitate the integration of the newly acquired racecourses,
together with the delivery of medium term television and media rights
objectives.
DEVELOPMENTS
As we indicated in our 1999 Annual Report, we continue to work closely with
the local planning authorities at both Folkestone and Lingfield to derive
value from surplus land at each location. Whilst planning remains a lengthy
process, we are pleased with the progress made to date, and will make
announcements at the appropriate time.
INTERNET
The Board is confident that it has identified a significant revenue generating
opportunity in the business of on-line gaming and is actively in the process
of developing an internet site which aims to broadcast pictures of horseracing
alongside on-line betting facilities. The Board is pleased to report that
good progress is being made in this regard and discussions are ongoing with
possible strategic partners for this project.
We have increased our investment in Arena Online Services Limited, our wholly-
owned subsidiary principally involved with developing the provision of an
online betting service in conjunction with live racing pictures. There is now
a growing appreciation and support throughout the UK horseracing industry for
our belief that the internet affords a unique opportunity to offer live
horseracing and gaming to a world-wide audience, thereby presenting a
significant new revenue generating opportunity.
ORGANISATION AND PEOPLE
We have strengthened the Board with the appointment, in July 1999, of Richard
Muddle as Director of Racing, and in September 1999, Andrew Parker-Bowles
joined as a non-executive Director. Both have very extensive experience in
the horseracing industry.
CURRENT TRADING AND PROSPECTS
Trading in the first nine weeks of the second half of the current year is in
line with expectations. Notwithstanding the two months of losses incurred at
Wolverhampton and Southwell (in line with budget and as a direct result of the
seasonality of the business) they have been successfully integrated into the
Group and their prospects are viewed optimistically.
The Board continues to invest in its internet strategy and is currently
exploring opportunities for this business. Negotiations with various
international gaming and other UK racing organisations, including the
Racecourse Association, continue and an announcement of any significant
developments will be made at an appropriate time. In any event, the Board
expects to be in a position to make a statement on the progress and prospects
of online gaming within the next three to six months.
Furthermore in keeping with the Board's strategy of expanding the racecourse
portfolio, a proposal was submitted to the BHB in August 1999 for a new
racecourse to the east of London. A decision is anticipated in the Spring, at
which time an appropriate announcement will be made.
As indicated in the Company's 1999 annual report, Arena Leisure continues to
evaluate a number of opportunities relating to the horseracing industry as
well as the leisure sector as a whole.
The Board views the prospects for the Enlarged Group with optimism.
Martin E Pope
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 6 Year
months months ended
ended ended 31
30 30 March
Acqui- Sept Sept 1999
Ongoing sitions 1999 1998 Audited
Unaudi Unaudi
Notes ted ted
#'000 #'000 #'000 #'000 #'000
Turnover 4,533 581 5,114 4,171 8,907
---------------------------------------
Operating Profit 373 (96) 277 453 1,277
Exceptional Items - - - - (96)
Net Interest (163) (78) (241) (151) (328)
Payable
-----------------------------------------
Profit on Ordinary
Activities before
and after Taxation (1) 210 (174) 36 302 853
and Retained
----------------------------------------
Earnings per share (2) 0.02p 0.16p 0.45p
-----------------------
Diluted earnings (2) 0.02p 0.15p 0.45p
per share
-----------------------
CONSOLIDATED BALANCE SHEET
At At At
30 30 31
Sept Sept March
1999 1998 1999
Unaudi Unaudi Audited
ted ted
#'000 #'000 #'000
FIXED ASSETS
Tangible Assets 39,473 19,981 20,307
Intangible Assets - Goodwill 2,954 - -
----------------------
42,427 19,981 20,307
CURRENT ASSETS
Stock 108 69 85
Debtors 2,228 1,395 1,971
Cash at bank and in hand 538 751 779
-----------------------
2,874 2,205 2,835
CREDITORS
Amounts falling due within more than one (4,590) (6,042) (4,740)
year
----------------------
NET CURRENT LIABILITIES (1,716) (3,837) (1,905)
-----------------------
Total assets less current liabilities 40,711 16,144 18,402
CREDITORS
Amounts falling due after one year (15,788) (1,417) (3,165)
Provisions for liabilities & charges - (41) -
-----------------------
24,923 14,686 15,237
-----------------------
CAPITAL & RESERVES
Called up share capital 12,751 9,401 9,401
Share premium account 6,300 - -
Other reserves 4,595 4,595 4,595
Profit and loss account 1,277 690 1,241
----------------------
SHAREHOLDERS' FUNDS 24,923 14,686 15,237
----------------------
CONSOLIDATED CASH FLOW STATEMENT
6 6 Year
months months ended
ended ended 31
30 30 March
Sept Sept 1999
1999 1998 Audited
Unaudi Unaudi
ted ted
#'000 #'000 #'000
Net cash inflow from operating activities 419 817 944
(3)
----------------------
Returns on investments and servicing of
finance:
Dividend received - - 118
Interest received - 23 38
Interest paid (241) (144) (366)
-----------------------
(241) (121) (210)
-----------------------
TAXATION
Corporation tax paid - - -
-----------------------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (825) (345) (557)
Sale of tangible fixed assets 29 2 -
------------------------
(796) (343) (557)
----------------------
ACQUISITIONS AND DISPOSALS
Acquisition of subsidiary (14,214) (3,070) (3,220)
-----------------------
NET CASH OUTFLOW BEFORE FINANCING (14,832 (2,717) (3,043)
---------------------
FINANCING
Issue of ordinary shares 7,050 - -
Expenses paid on issue of shares (400) - -
Inception of bank loans 9,300 - 1,200
Repayment of loans - (300) (142)
Inception of other loans 39 - -
----------------------
15,989 (300) 1,058
-----------------------
Increase/(decrease) in cash (4) 1,157 (3,017) (1,985)
------------------------
NOTES:
(1) The tax charge for the period is nil due to the
availability of tax losses
(2) Earnings per ordinary share have been calculated using
the weighted average number of shares in issue during
the periods. The weighted average number of shares in
issue for the 26 weeks ended 30 September 1999 is
210,347,698 (26 weeks ended 30 September 1998:
188,013,260). The weighted number of equity shares used
for calculation of the diluted earnings per share is
211,826,129 (1998: 188,013,260)
(3) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
6 6 Year
months months ended
ended ended 31
30 30 March
Sept Sept 1999
1999 1998 Audited
Unaudi Unaudi
ted ted
#'000 #'000 #'000
Operating profit 277 453 1,277
Depreciation charges 292 138 305
Amortisation of goodwill 25 - -
Profit on disposal of tangible fixed - (2) -
assets
Dividend received - - (118)
Decrease/(Increase) in stocks 5 8 (9)
Decrease/(Increase) in debtors 527 (225) (733)
(Decrease)/Increase in creditors (707) 449 363
Decrease in provisions - (4) -
Exceptional items - - (141)
----------------------
Net cash inflow from operating activities 419 817 944
----------------------
(4) RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN
NET DEBT
6 6 Year
months months ended
ended ended 31
30 30 March
Sept Sept 1999
1999 1998 Audited
Unaudi Unaudi
ted ted
#'000 #'000 #'000
Increase/(decrease) in cash in the period 1,157 (3,017) (1,985)
Cash received from loans incepted (9,339) - (1,200)
Cash used to repay loans - 300 142
-----------------------
Change in net debt arising from cash (8,182) (2,717) (3,043)
flows
Loans acquired on acquisition (1,414) - (476)
-------------------------
Change in net debt during period (9,596) (2,717) (3,519)
Opening net debt (5,398) (1,879) (1,879)
--------------------------
Closing net debt (14,994) (4,596) (5,398)
--------------------------
(5) There have been no changes to the accounting policies of
the group as set out in the 1999 financial statements
(6) The figures for the year ended 31 March 1999 have been
extracted from the accounts which have been filed with
the Registrar of Companies. The auditors' report on
those accounts was unqualified
DEFINITIONS
In this announcement, the following expressions shall have the following
meanings, unless the context otherwise requires:
'Acquisition' the proposed acquisition of the Windsor Group
'Acquisition Agreement' the conditional agreement pursuant to which Arena
Leisure will acquire the entire issued share capital
of the Windsor companies
'Arena Leisure' or
the 'Company' Arena Leisure Plc
'Board or Directors' the directors of Arena Leisure Plc
'Cash Placing' the placing of 12,750,820 Ordinary Shares (equal to
5% of the Company's issued share capital prior to
the issue) at 62p per share which was announced on 3
December 1999
'Consideration Shares' the 2,777,778 Ordinary Shares to be issued credited
as fully paid pursuant to the Acquisition Agreement
'Enlarged Group' the Company and its subsidiaries following
completion of the Acquisition
'Facility Agreement' the conditional facility agreement constituted by a
facility letter dated 22 December 1999 from the
Governor and Company of the Bank of Scotland (the
'Bank') to the Company and certain of its
subsidiaries and accepted by each of those companies
'Group' the Company and its subsidiaries prior to completion
of the Acquisition
'Ordinary Shares' ordinary shares of 5p each in the capital of the
Company
'Shareholders' holders of existing issued Ordinary Shares
'Vendors' David Thompson, Incagrove Limited and Lathkil
Securities Limited
'Windsor Concessions' Windsor Concessions Limited
'Windsor Group' or The Windsor Racecourse Company Limited, Windsor
'Windsor Companies' Racing Limited and Windsor Concessions Limited
'Windsor Racing' Windsor Racing Limited, a subsidiary of The Windsor
Racecourse Company Limited
'Windsor Racecourse Company' The Windsor Racecourse Company Limited
END
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