RNS Number:2082D
Arena Leisure PLC
8 May 2001
Not for release, publication or distribution in or into the United States,
Canada, Australia or Japan.
Embargoed for release at 7.00 a.m. on 8 May 2001
ARENA LEISURE PLC
Go Racing acquisition of Media Rights to British horseracing signals a new era
of global multi-platform development of the sport
Arena becomes a 33.33 per cent. shareholder in Go Racing as agreement with
BSkyB and Channel Four is signed
Arena becomes entitled to 3 per cent. of all gross pari-mutuel betting
revenues derived from exploiting the Media Rights
Proposed equity fundraising of #85m
New Board appointments
Preliminary results for the 9 months to 31 December 2000
Highlights
- Principal condition of Go Racing's agreement to acquire Media Rights to
British horseracing for up to ten years fulfilled, with acceptances by
courses representing over 70 per cent. of UK off-course betting turnover
- Go Racing now has the capability to transform British horseracing through
exploitation of Media Rights on all media platforms on a global basis
- Shareholders' agreement to establish Go Racing signed, with Arena, BSkyB
and Channel Four, each owning 33.33 per cent. (28.33 per cent. if BBC and
ntl exercise their options)
- Arena to receive 3 per cent. of gross pari-mutuel horseracing betting
revenues on all worldwide media platforms operated or licensed by Go
Racing
- Proposed equity fundraising of #85m
- New Board appointments, including Ian Penrose, formerly Group Finance
Director becoming Group Managing Director following move of Graham Parr
to non-executive director
- Pre tax loss of #6.2m for nine months to 31 December 2000, as Trackplay
investment of #6.8m is completed
Martin Pope, Chairman of Arena, said: "We are delighted to announce today the
signing of the Go Racing joint venture arrangements with our partners, BSkyB
and Channel Four, and that Go Racing has finalised the Media Rights Agreement
with the Racecourse Association. We are pleased that Go Racing has already won
the commitment of a significant majority of British racecourses, including
worldwide renowned names such as Aintree, Ascot and Cheltenham. We urge the
remaining courses to return their signed contracts by the closing date of 11
May to ensure their participation in this exciting venture. "
"Go Racing brings together a combination of complementary expertise:
production and terrestrial broadcasting from Channel Four, interactive digital
distribution capability from BSkyB and online gaming expertise from Arena and
its partner Autotote Systems Inc. of the US. We believe that Go Racing has the
capability to transform British horseracing in the same way that English
football has been regenerated over the last decade through the exploitation of
media rights."
"Go Racing, having signed the Media Rights Agreement with racecourses which
represent over 70 per cent. of UK off-course betting revenues, is ideally
placed to capitalise on the immense potential of British horseracing and to
capture a share of the estimated $9 billion (#6.3 billion) British horseracing
gaming market, and the $100 billion (#69 billion) and expanding global
horseracing gaming market. This is an exciting time for Arena."
Deutsche Bank is acting as financial adviser and broker to Arena in relation
to the Company's investment in Go Racing and the proposed equity fundraising.
There will be a Press Conference at 11.30am today (8 May 2001) at Deutsche
Bank, Winchester House, 1 Great Winchester Street, London EC2.
For further information, contact:
Ian Penrose, Arena Leisure Plc 020 7495 2277
Charles Wilkinson/David Marks, Deutsche Bank 020 7545 8000
David Rydell/Caroline Sturdy, Bell Pottinger Financial 020 7353 9203
Deutsche Bank, which is regulated in the United Kingdom by The Securities and
Futures Authority Limited, is acting exclusively for Arena and no-one else in
connection with the matters referred to in this announcement and will not be
responsible to anyone other than Arena for providing the protections afforded
to customers of Deutsche Bank or for providing advice in relation to the
contents of this announcement or any other matters referred to herein.
Background to Go Racing
Arena Leisure Plc ("Arena" or the "Company") believes that the value of the
media rights to British horseracing can best be maximised by exploiting the
rights of British racecourses (the "Courses") together and marketing British
horseracing as a global entertainment and gaming product.
In October 2000, Arena announced the formation of an equally-owned joint
venture with British Sky Broadcasting Limited ("BSkyB") (through its
subsidiary Sky Ventures Limited) and Channel Four Television Corporation
("Channel Four") (through its subsidiary 4 Ventures Limited), named "Go
Racing" to bid for a ten-year licence of the global media rights to British
horseracing (the "Media Rights").
On 1 December 2000, the Racecourse Association (the "RCA"), acting on behalf
of the Courses, announced that it favoured Go Racing's bid and 57 of the 59
British racecourses entered into an exclusivity agreement to negotiate the
licence of Media Rights (the "Media Rights Agreement").
Media Rights Agreement
On 27 April 2001, after concluding the terms of the Media Rights Agreement
with the RCA, Go Racing sent this agreement to 50 of the 59 British
racecourses. The Media Rights Agreement is conditional, inter alia, upon the
acceptance by Courses representing at least 70 per cent. of UK off-course
betting revenues, Arena financing and the British Horseracing Board (the
"BHB") granting a licence of pre race data to Go Racing. Go Racing has
announced that it has already achieved the 70 per cent. acceptance condition
(Appendix D). The closing date for final acceptances from outstanding
racecourses is 11 May 2001.
The Media Rights include the broadcast rights through all media, including
television, radio, internet and telephone commentary, with the exception of
certain reserved rights, primarily those to broadcast into UK licensed betting
offices ("LBOs"), which are currently contracted to Satellite Information
Services Ltd ("SIS"). The SIS contract for the rights to broadcast into the UK
and Republic of Ireland LBOs is due for renewal in 2002.
In consideration of the grant to Go Racing of a worldwide licence to exploit
the Media Rights for a period of up to ten years. Go Racing has undertaken to
pay to the RCA (for distribution amongst the Courses) a guaranteed minimum sum
of #320 million over the ten year period (this amount assumes that all 59
racecourses are signed to Go Racing and will be abated to the extent that this
is not the final outcome). This sum represents:
(i) a #125 million fixed payment over ten years in respect of television
broadcasting rights which will be covered by payments to Go Racing from the
sub-licensee broadcasters; and
(ii) #195 million as a minimum guaranteed share of betting and other revenue
from exploitation by Go Racing of the Media Rights.
In addition, Go Racing has committed to spend at least #80 million (with a
minimum annual spend of #5 million) over the ten year period on marketing to
further enhance the repositioning of British horseracing. The Courses will
also receive additional payments based on Go Racing's betting and other
revenues arising from the exploitation of the Media Rights. It is expected
that the Media Rights Agreement will become unconditional upon the passing of
the resolutions at an Extraordinary General Meeting ("EGM") of Arena expected
to be held on or around 22 June 2001.
Exploitation of the Media Rights by Go Racing
In order to exploit the Media Rights, Go Racing will enter into various
sub-licences for terrestrial and satellite broadcasting with the BBC, Channel
Four and BSkyB (each conditional upon the Media Rights Agreement becoming
unconditional). Go Racing has also undertaken to establish a new television
channel (the "Channel") and a web-site primarily dedicated to the coverage of
British horseracing (the "Website"). Both the Channel and the Website are
intended to be interactive so that viewers may access form, odds and other
information relating to the races shown on such services and so that they may
place bets on such races. Go Racing will operate pari-mutuel gaming on the
Website and other interactive media through which it exploits the Media
Rights. Arena's 'Trackplay' system will be the technology behind Go Racing's
pari-mutuel gaming operations. Go Racing will also enter into various other
agreements relating to the production, transmission and distribution of the
Media Rights, conditional upon the Media Rights Agreement becoming
unconditional.
Pari-mutuel gaming (or pool betting as it is otherwise known) operates in a
similar way to a lottery. All bets are pooled, the gaming provider takes a
fixed percentage of the total pool as revenue and the remainder of the pool is
distributed to winning ticket holders. The Board of Arena believes that
pari-mutuel gaming is a very attractive proposition as the gaming provider
takes a proportion of the total betting pool as income and avoids the pay out
position risk associated with fixed odds betting. Pari-mutuel gaming accounts
for approximately 95 per cent. of gaming on horseracing worldwide.
Go Racing brings together for the first time in the history of horseracing,
exclusive media rights, terrestrial broadcasting, global distribution and
online gaming. The Board believes that Go Racing represents a new and exciting
era in the development of horseracing and that Arena is ideally placed to
benefit from the expected growth of the sport and the associated increase in
gaming, from both existing and new markets.
The Go Racing Joint Venture
Go Racing's founder shareholders, Arena, BSkyB and Channel Four (the "JV
Parties"), have signed the Go Racing joint venture agreement which governs the
relationship between them in relation to Go Racing and is conditional upon the
Media Rights Agreement becoming fully unconditional.
Pursuant to the JV Agreement, Go Racing is to be funded as follows (and in the
following order):
(i) #50 million from initial payments under the broadcaster sub-licences and
advances from Arena under the Go Racing Loan Facilities (see below); and
(ii) #70 million by the JV Parties pro rata to their shareholdings.
If Go Racing's funding requirements exceed #120 million, the JV Parties are to
review Go Racing's future strategy. More details of the funding obligations of
the JV Parties are set out in Appendix A.
At completion, Go Racing's board will consist of eight directors: Christopher
Stoddart, an independent Chief Executive, two directors appointed by each of
Arena, BSkyB and Channel Four and one non-executive director appointed by the
RCA with mutual agreement from the BHB on behalf of the racing industry.
Thereafter, any shareholder with 20 per cent. or more of Go Racing's share
capital will have the right to appoint three directors and those with between
10 per cent. and 20 per cent. will have the right to appoint one director.
Go Racing has appointed Christopher Stoddart as its independent chief
executive and will continue to employ others to manage and operate the
business. Chris, 51, was previously Chief Executive and Managing Director of
GMTV Ltd, a position he held since that company was founded in 1992. Chris was
responsible for the launch of GMTV's successful web-site and GMTV's digital
terrestrial television service. Between 1988 and 1992, Chris was Managing
Director of SIS, a company involved with providing gaming facilities to the UK
horseracing industry and jointly owned by the RCA, the Tote and the holding
companies of Ladbrokes, William Hill, Mecca and Corals. Chris has 19 years
experience in the television and gaming industries both in the UK and
internationally.
BBC and ntl options
Go Racing has granted the BBC an option to subscribe for 5 per cent. of Go
Racing's share capital exercisable within 30 days of Go Racing acquiring the
Media Rights. An option to subscribe for a minimum of 10 per cent. of Go
Racing's share capital has also been granted by Go Racing to Premium TV
Limited, a subsidiary of ntl. This option is exercisable within 70 days of the
Media Rights having been acquired. If the BBC does not exercise its option
then ntl will have the right to further subscribe for the BBC's 5 per cent.
entitlement within 70 days of the lapsing of the BBC's option. If the BBC and/
or ntl exercise fully their options, the JV Parties have agreed to procure the
issue of the relevant shares and agree such changes as may be necessary to the
JV Agreement.
Arena's #80 million loan facilities in favour of Go Racing
As part of its investment in Go Racing, Arena will enter into committed loan
facility agreements for an aggregate amount of #80 million with Go Racing plc
and Go Racing (Gibraltar), such amounts to be advanced in instalments over a
period of ten years. Pursuant to these facilities Arena will receive (as
principal and interest) 3 per cent. of the gross pari-mutuel gaming turnover
(i.e. gaming 'drop' prior to the deduction of any costs) from all media
platforms operated by the Go Racing Group. Further details of how these
advances and repayments are to be made are contained in Appendix A.
Background to Arena
For some time now, Arena has believed that new media such as internet,
interactive digital television and mobile telephony provide a real opportunity
for the Media Rights to British horseracing to be commercially exploited. The
Company believes that the combination of new media and technology offers major
revenue generating opportunities from global broadcasting and, in particular,
from potential revenues from worldwide interactive gaming based on live
pictures of British horseracing.
In order to capitalise on the opportunities presented by interactive gaming,
the Company made a significant investment in interactive gaming technology
through its wholly owned subsidiary Arena Online. Arena Online has developed
software that allows punters to view races, research form and other race
information and place pari-mutuel bets on live races. This software can be
used on the internet and other media such as interactive digital television.
In furtherance of Arena's aims in relation to online gaming, Arena announced
in February 2000 a development agreement with Autotote Corporation Inc.
("Autotote"), a company listed on the Amex Exchange in the US, to create '
Trackplay', the world's premier interactive platform neutral, pari-mutuel
gaming hub for British and international horseracing. Autotote is the world's
leading provider of pari-mutuel gaming technology to racecourses and national
tote operators. Trackplay has already been licensed to the Fairgrounds
Racecourse (Louisiana) and Arena and Autotote are in discussions with other
interested parties.
Arena as a racecourse owner
Arena has pursued a strategy of acquiring a strong and balanced portfolio of
racecourses and race fixtures. Arena now owns 6 of the 59 racecourses in
Britain, including all of the 3 UK all-weather courses and the only floodlit
course in the country. In particular, Arena has sought to acquire racecourses
which attract significant levels of off-course betting revenue. In 1999
Arena's 6 courses staged approximately 19 per cent. of all British horseracing
fixtures and accounted for around 16 per cent. of British off-course
horseracing betting revenues.
As a racecourse owner, Arena will be entitled to receive a share of the
payments which Go Racing will make to the Courses. These payments to the
Courses include, in aggregate over the ten year licence period, #125 million
payable in respect of television broadcast rights and a guaranteed minimum
share of revenue of #195 million in respect of interactive Media Rights,
together with any additional revenue that may be due in excess of the
guaranteed revenue share. The exact nature of the distribution of the minimum
payments to Courses is subject to agreement between the Courses and the RCA.
However, on the assumption that the manner of distribution of these payments
broadly reflects the level of off-course betting 'turnover' made on each
course, the Board would expect Arena to receive around 8 per cent. of the
guaranteed payments, together with 16 per cent. of any top up revenues.
Given that Arena owns all of the UK all-weather courses, the Company is
confident of being able to offer year-round racing and expects additional
benefits to be obtained from the Go Racing package, including an increase in
attendance at the Courses as the profile of the sport is enhanced.
The Board of Arena recognises the importance of maintaining its portfolio of
racecourses and as a result intends to invest approximately #10 million in
improving these facilities over the next 24 months.
Arena funding
Arena proposes to raise approximately #85 million through a Placing and Open
Offer to:
- assist Arena's funding obligations to Go Racing, which the Board do not
expect to exceed #23 million over the next 2 years. These are required to
fund, amongst other things, the set-up of Go Racing's Website, digital
channel and its working capital requirements; and
- fund the first #37 million (in aggregate) of advances to be made by Arena
to the Go Racing Group pursuant to the #80 million loan facilities.
The balance will be used to reduce Arena's current indebtedness and to provide
working capital. The Placing and Open Offer will follow a marketing and
book-build process, to be conducted by Deutsche Bank, following which the
issue price of the Placing and Open Offer will be set. Detailed terms of the
Placing and Open Offer will be included in a prospectus to be sent to the
Company's shareholders shortly thereafter.
The Board
Arena is today making the following changes to its Board of Directors.
Graham Parr, 51, steps down from his position as Chief Executive but remains
as a non-executive director. Graham has played an important role in building
Arena and the Board is pleased that the Company will continue to have the
benefit of his experience going forward.
Martin Pope, 57, has agreed to remain Executive Chairman at this important
stage in the Company's development, and will be working closely with the
enlarged Board, details of which follow below.
Ian Penrose, 36, previously Group Finance Director, is appointed Group
Managing Director. Ian will take responsibility for day-to-day executive
management, and has been instrumental in the negotiation of Arena's recent
racecourse acquisitions, its media and interactive strategy, the formation of
Go Racing and related negotiations with the RCA.
Arena is currently in the process of recruiting a Finance Director. In the
meantime, Ian Penrose will continue to retain overall responsibility for the
finance function.
In line with the Company's strategy to harness new technology in the
development of gaming and other media opportunities, the Board is pleased to
announce the appointment of its first Director of Gaming Systems. Ian Hogg,
38, Managing Director of Arena Online, the Group's technology subsidiary, is
appointed to the Board in this post. This appointment reflects the increasing
importance of new technology and gaming to the Company's future.
The Company has also moved to strengthen the Board with the appointment of
Roger Withers as a non-executive director. Roger, 58, has been involved at a
senior level in the betting, gaming and leisure industries in the UK and
internationally for thirty years, principally with Ladbrokes (now Hilton) and
Bass. He is a Director of Sportech PLC and Leisure Parcs Ltd. He also holds
several other non-executive directorships in the leisure, publishing and
exhibition industries.
Arena has undergone rapid and substantial organisational change. The
successful implementation and execution of the Board's strategy could not have
been achieved without the enormous efforts and loyalty of its employees, to
whom the Board would like to extend its sincere appreciation.
Preliminary Results
The Company has also today announced its preliminary results for the 9 months
ended 31 December 2000, including an update on current trading and prospects
(Appendix B).
Extraordinary General Meeting
It is expected that a circular convening an EGM of the Company, including
resolutions to approve the Company's investment in Go Racing and the Placing
and Open Offer, will be sent to shareholders shortly. The Company's two
largest shareholders, representing 55 per cent. of the share capital, have
indicated to the Company that they will vote in favour of the resolutions
required to give effect to Arena's investment in Go Racing.
Appendix A
FURTHER DETAILS RELATING TO GO RACING AND THE MEDIA RIGHTS AGREEMENT
1. Background
Go Racing is a joint venture company formed by Arena, Channel Four and BSkyB
to be the holding company of the Go Racing Group.
The shareholdings in Go Racing are:
No. of ordinary shares in Go Racing Per cent.
Arena 1,000 33.33
BSkyB 1,000 33.33
Channel Four 1,000 33.33
Go Racing has three wholly owned subsidiaries: Go Racing plc, Go Racing (UK)
and Go Racing (Gibraltar). It is proposed that (conditional upon of the Media
Rights Agreement becoming unconditional):
(i) Go Racing plc will acquire the Media Rights and will be responsible for
the exploitation of such rights in the UK (including operating a British
pool betting business);
(ii) Go Racing (UK) will be licensed by Go Racing plc to exploit the Media
Rights outside the UK; and
(iii) Go Racing (Gibraltar) will operate a pool betting business outside the UK.
In addition to the agreements detailed below, Go Racing plc will enter into
certain other agreements relating to the production, transmission and
distribution of the Media Rights which will be conditional upon the Media
Rights Agreement becoming unconditional.
2. Go Racing Shareholders' Agreement
The relationship between Arena, Channel Four and BSkyB (the "JV Parties"), as
parties to the Go Racing joint venture, is governed by the JV Agreement. The
JV Agreement is conditional upon the Media Rights Agreement becoming
unconditional. If the BBC and/or ntl exercise their options referred to below,
the JV Parties have agreed to procure the issue of the relevant shares and
agree such changes as may be necessary to the JV Agreement.
Pursuant to the JV Agreement, Go Racing is to be funded as follows (and in the
following order):
(i) #50 million from initial payments under the broadcaster sub-licences and
advances under the Go Racing Loan Facilities (see below);
(ii) the next #70 million of funding is to be provided by the JV Parties pro
rata to their holdings from time to time by way of subscription for equity
and shareholder loan notes (bearing interest at one per cent. above LIBOR);
The above funding allows Go Racing a significant amount of headroom over its
business plan. In the unlikely event that Go Racing's funding requirements
exceed #120 million, the JV Parties are to review Go Racing's future strategy.
Funding beyond the above amounts will be provided as follows:
(i) up to #20 million in non-recourse third party loans (although if such
funding is not available, Arena will provide such finance by way of
subscription for loan notes of Go Racing bearing interest at a rate of five
per cent. above LIBOR);
(ii) any further funding requirements are to be provided by the JV Parties pro
rata to their existing holdings (although BSkyB and Channel Four have the
right not to participate in such funding) and Arena is not required to fund
any further if it (or any other shareholder) holds 75 per cent. or more of
the issued shares (assuming conversion of any convertible loan notes). Any
such further funding will be by way of subscription for equity or
convertible loan notes bearing interest at one per cent. above LIBOR.
Payments of interest and principal under the shareholder loan notes and the
convertible loan notes may only be made by Go Racing if Go Racing's business
is on a continuing basis generating positive cash flows in excess of its
operating requirements, and in such event, payments may only be made out of 80
per cent. of the amount of any surplus cash reserves.
At completion, Go Racing's board will consist of eight directors (two
appointed by each of Arena, BSkyB, and Channel Four, one non-executive
director appointed by the RCA (with mutual agreement from the BHB) on behalf
of the horseracing industry, and an independent chief executive appointed by
the JV Parties. The JV Parties have appointed Christopher Stoddart.
Thereafter, any shareholder with 20 per cent. or more of Go Racing's share
capital will have the right to appoint three directors and those with between
10 per cent. and 20 per cent. will have the right to appoint one director. In
addition to the appointment of an independent chief executive it is intended
that Go Racing will appoint other employees to manage and operate the
business. The quorum at any board meeting will be constituted by the presence
of one director of each of the shareholders.
Certain matters, such as amending Go Racing's constitution or varying the
terms of the Media Rights Agreement will require the prior consent of all
shareholders. Other material matters, such as entering into long term or
material contracts or amending Go Racing's business plan, require the prior
approval of holders of 75 per cent. or more of Go Racing's share capital.
Go Racing's shareholders are absolutely prohibited from transferring their
holdings within the first 18 months of the venture (other than to another
member of their own group). Thereafter, shareholders have a right of first
refusal on any transfer and also a right of first offer. Save for intra-group
transfers or transfers otherwise consented to by all shareholders, transfers
must be of all (rather than some only) of a shareholder's shares. In any
event, no transfer is permissible if it would cause Go Racing to be in breach
of the Media Rights Agreement. Any transferee must execute a deed of adherence
to the JV Agreement.
3. Go Racing's Media Rights Agreement with Racecourses
As at 4 May 2001, Go Racing plc and Go Racing Holdings had signed an agreement
for the acquisition from their operators/owners of the Media Rights (the
"Media Rights Agreement") with the RCA and the following British racecourses
(the "Racecourses"):
Aintree, Ascot, Ayr, Bath, Brighton, Carlisle, Cheltenham, Chepstow, Chester,
Doncaster, Epsom, Folkestone, Goodwood, Haydock Park, Hereford, Huntingdon,
Kempton Park, Lingfield Park, Market Rasen, Newbury, Newcastle, Newmarket,
Nottingham, Sandown Park, Southwell, Uttoxeter, Warwick, Wincanton, Windsor,
Wolverhampton, Worcester and York.
The Media Rights Agreement is conditional on, inter alia, Arena raising at
least #60 million on an unconditional basis by no later than 30 June 2001. The
Media Rights Agreement is also conditional upon the BHB granting a licence of
pre-race data to Go Racing and the RCA confirming in writing to Go Racing that
the material Go Racing agreements comply with the terms of the Media Rights
Agreement.
In consideration for the grant to Go Racing plc of an exclusive worldwide
licence to exploit the Media Rights for ten years (subject to termination
after five years, as described below), Go Racing plc has undertaken to pay to
the RCA (for distribution amongst the Racecourses) a guaranteed minimum sum of
#320 million over the ten year period (this amount assumes that all 59
racecourses are signed to Go Racing and will be abated to the extent that this
is not the final outcome). This sum represents #125 million payable in respect
of television broadcasting rights and #195 million as a minimum guaranteed
share of betting and other revenue from exploitation of the Media Rights. The
payments will be made by Go Racing plc as follows:
Year Total Guaranteed Amounts Totals
(# million) (# million)
Broadcast rights Revenue Share
2001 6.25 18.75 25.0 (1)
2002 18.75 28.75 47.5 (2)
2003 12.5 12.5 25.0
2004 12.5 12.5 25.0
2005 12.5 15.0 27.5
2006 12.5 17.5 30.0
2007 12.5 20.0 32.5
2008 12.5 22.5 35.0
2009 12.5 22.5 35.0
2010 12.5 25.0 37.5
-------------- ------------ -------------
125.0 195.0 320.0
(1) Such #25 million shall be payable in two equal instalments on 1 July
2001 and 1 October 2001.
(2) Such #47.5 million shall be payable in two instalments of #12.5
million on 1 January 2002 and 15 March 2002 and one instalment of #22.5
million on 1 July 2002.
At each anniversary of the Media Rights Agreement, to the extent that the
cumulative aggregate of:
(i) 3 per cent. of Go Racing's gross betting revenues received from its
pari-mutuel betting activities;
(ii) 40 per cent. of Go Racing's net revenues (after deduction of direct costs)
from fixed odds betting activity; and
(iii) 25 per cent. of Go Racing's net revenues (after deduction of direct costs)
from all other activities,
in the course of exploiting the Media Rights, exceeds the cumulative aggregate
guaranteed revenue payments, Go Racing shall account to the RCA (for
distribution to the Racecourses) for such excess within 120 days of such
anniversary date. In addition, Go Racing plc has committed to spend at least #
80 million (with a minimum annual spend of #5 million) over the ten year
period on marketing of horseracing.
The Media Rights (which are subject to certain reserved rights) include the
right to exploit RaceTech coverage of races (and race related events) and to
create audio visual, virtual and audio coverage of races (and race related
events) for exploitation by all current and future distribution media (e.g.
all forms of television, video, radio, internet, digital subscriber line and
mobile wireless technology). Go Racing plc is not permitted to exploit the
Media Rights in relation to LBOs in the UK and Republic of Ireland or in
relation to certain other reserved rights.
The Media Rights Agreement is terminable by the RCA on 30 June 2006 if,
broadly, as at 31 December 2005, Go Racing either:
(a) does not reach its performance targets of #20 million for the amounts
accrued in sub-paragraphs (i), (ii) and (iii) above over the initial four
and a half year period; and/or
(b) achieves a rate of return on its investment in exploiting the Media Rights
of 15 per cent. or more.
In order to exploit the Media Rights and to ensure that British horseracing is
televised on as many different platforms as possible, Go Racing will enter
into various sub-licences for terrestrial and satellite broadcasting with the
BBC, Channel Four and BSkyB. Go Racing has also undertaken to establish a new
television channel (the "Channel") and a website primarily dedicated to the
coverage of British Horseracing (the "Website"). Both the Channel and the
Website are intended to be interactive so that viewers may access form, odds
and other information relating to the races shown on such services and also so
that they may place bets on such races. Arena's 'Trackplay' system will be the
platform for Go Racing's pari-mutuel betting operations.
4. Go Racing Loan Facilities
Arena has entered into loan facilities of an aggregate amount of #80 million
with Go Racing plc and Go Racing (Gibraltar) (conditional upon the Media
Rights Agreement becoming unconditional). The #80 million can be drawn down
under either facility in the aggregate amounts and at the times specified
below:
Year Totals
(# million)
30 June 2001 9.375
30 September 2001 9.375
31 December 2001 9.375
14 March 2002 8.875
30 June 2004 1.5
30 June 2005 3.0
30 June 2006 3.0
30 June 2007 6.0
30 June 2008 7.5
30 June 2009 10.0
30 June 2010 12.0
----------
80.0
The repayment of interest and principal on the advances is made by way of the
payment of 3 per cent. of the Go Racing Group's gross pari-mutuel betting
revenues relating to horseracing.
5. Website and Pool Betting Services Agreement
Arena has agreed to provide and operate Go Racing's pari-mutuel gaming
facilities for Go Racing's Channel and Website (and also for any other new
interactive media platforms that Go Racing may wish to use). This agreement
will terminate if the Media Rights Agreement does not become unconditional.
Arena will also provide additional services to Go Racing relating to these
platforms. This Agreement is for ten years, but is terminable after three
years on six months written notice by Go Racing to Arena. In consideration for
Arena providing these services and systems, Arena will receive a service
charge (as agreed with Go Racing), together with a margin on certain of the
direct costs it incurs for the platforms.
Arena is not responsible for the editorial content on the Website or the
Channel.
6. Go Racing and the BBC sub-licence
In consideration for the BBC surrendering its existing television broadcast
rights to races at Aintree, Ascot, Chepstow, Goodwood, Haydock Park, Newbury
and Uttoxeter to Go Racing, Go Racing has agreed to grant the BBC a
sub-licence of the rights to broadcast in the UK races from these courses
together with the Epsom Derby meeting, which will be coterminous with the
Media Rights Agreement.
7. Go Racing and options granted to ntl and BBC
Go Racing has granted an option to subscribe for 10 per cent. of Go Racing's
share capital to Premium TV Limited (a wholly-owned subsidiary of ntl) ("PTV")
which is exercisable within the 70 day period following the acquisition of the
Media Rights. PTV has agreed that if it exercises this option, it will
contribute 10 per cent. of any annual funding requirement of Go Racing. PTV's
payment obligations will be guaranteed by ntl.
Completion of the option will be conditional on PTV procuring the distribution
by ntl of Go Racing's television channel on its cable network.
The BBC has been granted an option to subscribe for 5 per cent. of Go Racing's
share capital which will be exercisable within the 30 day period following Go
Racing's acquisition of the Media Rights. If the BBC exercises this option, it
will contribute 5 per cent. of any annual funding requirement of Go Racing.
If the BBC's option to subscribe for 5 per cent. of Go Racing is not
exercised, PTV will have an option to acquire a further 5 per cent. stake in
Go Racing exercisable within 70 days of notification by Go Racing of the BBC's
option lapsing.
Go Racing has agreed that if and for so long as PTV has 10 per cent. or more
of the share capital of Go Racing, it has the right to appoint one director.
8. Go Racing's other broadcaster sub-licences
In addition to the agreement with the BBC described above and conditional upon
the Media Rights Agreement becoming unconditional, Go Racing will enter into
sub-licences for the broadcast of certain races with:
(i) Channel Four; and
(ii) BSkyB.
9. Distribution agreements
Go Racing has entered into agreements (conditional upon completion of the
Media Rights Agreement becoming unconditional) with:
(i) Channel Four for the distribution of the Channel via digital terrestrial
television ("DTT") capacity; and
(ii) BSkyB for the distribution of the Channel via satellite.
Each of BSkyB and Channel Four will receive a distribution fee of 1.2 per
cent. of gross betting revenue for the Channel passed through their
distribution system.
Appendix B
Arena's Financial Results for the 9 months ended 31 December 2000
Statement by the Chairman
In order to bring the Company's financial year into line with the racing
industry calendar it has changed its accounting reference date to 31 December.
As a consequence of this, the results to 31 December 2000 represent a nine
month trading period.
The unaudited preliminary results for the nine months to 31 December 2000 show
an increase in turnover to #15,700,000 (12 months to 31 March 2000: #
14,423,000). The results reflect a full period contribution from
Wolverhampton, Southwell, Royal Windsor and Worcester racecourses all of which
were acquired during the previous financial year.
Net profit from the Racecourse division (excluding group management charges)
grew to #1,669,000 for the period (12 months to 31 March 2000: #1,642,000).
In accordance with the prudent accounting policy adopted in the preparation of
the annual report to 31 March 2000, all monies invested in the development of
the Company's interactive gaming technology have been written off along with
the cost of other business development activities. This in no way diminishes
the Board's belief in the potential of these projects.
The provision for employers' national insurance on share options granted after
5 April 1999 has been adjusted in line with the Company's share price at 31
December 2000 and as a result a credit of #386,000 has been released to the
profit and loss account. The provision at 31 December was #289,000 and
incorporates a pool of 3 million share options approved by the shareholders at
the Extraordinary General Meeting of 25 January 2000.
Goodwill amortisation charges relating to the acquisition of Wolverhampton,
Southwell and Royal Windsor racecourses totalled #231,000 for the nine month
period (12 months to 31 March 2000: #119,000). This together with the
continued investment in gaming technology and the cost of positioning the
Company for future developments resulted in an operating loss of #5,036,000
(12 months to 31 March 2000: #2,293,000).
With net interest payable increasing to #1,171,000 for the nine month period
(12 months to 31 December 2000: #671,000) the loss on ordinary activities
before and after tax is #6,207,000 (12 months to 31 March 2000: #2,964,000).
The basic loss per share was 2.29 pence (12 months to 31 March 2000: 1.21
pence).
Net bank borrowings at the year end totalled #26,320,000 which together with
loans from the Horserace betting Levy Board of #1,365,000, represent gearing
of 106 per cent. on net assets of #26,145,000 (31 March 2000: gearing of 65
per cent. on net assets of #32,352,000).
Dividend
As indicated in previous Annual Reports, it is not the Board's intention to
pay a dividend either for the period to 31 December 2000, or for the current
financial year, as it is the Company's priority to invest in the long-term
growth of its business.
Racecourse Division
Ian Renton has been appointed Racing Director, having previously carried out
similar responsibilities at Aintree, Wincanton and Salisbury. Trevor Phillips,
whose previous roles have included Commercial Director of both The Football
League and The Football Association, has been appointed Commercial Director.
Edward Taylor, who has had previous senior management roles in catering,
operations and technology, has been appointed Operations Director.
The Board has continued to invest in a number of improvements in
infrastructure at its racecourses, including a permanent marquee at Windsor,
improvements to the racing surface at Worcester, and a major reworking of the
all-weather surface at Southwell.
Current Trading and Prospects
The racing industry has been severely hit by the foot and mouth outbreak.
Despite this, and the consequent loss of 6 fixtures, trading has been broadly
in line with expectations.
We are pleased with the progress that your company has made, particularly over
the last few months, the full benefits of which will be realised progressively
over the forthcoming years.
Martin Pope
Chairman
8 May 2001
ARENA LEISURE PLC - PRELIMINARY RESULTS
Consolidated profit and loss account (Unaudited)
9 months ended Year ended
31 December 31 March
2000 2000
#000 #000
Turnover 15,700 14,423
Cost of sales (11,486) (9,635)
-------------- -----------
Gross profit 4,214 4,788
Administrative expenses
Exceptional share option credit/(costs) 386 (675)
Other (9,636) (6,631)
------------- ------------
(9,250) (7,306)
Other operating income - 225
------------- ------------
Operating loss (5,036) (2,293)
Net interest payable (1,171) (671)
Loss on ordinary activities before ------------- -----------
and after taxation and retained (6,207) (2,964)
------------- -----------
Pence Pence
Basic and diluted loss per share (2.29) (1.21)
Consolidated balance sheet (Unaudited)
31 December 31 March
2000 2000
#000 #000
Fixed assets
Tangible assets 52,608 51,512
Investments 345 345
Intangible assets 5,801 6,032
------------- ------------
58,754 57,889
Current assets
Stock 167 163
Debtors - due within one year 2,911 2,672
Cash at bank and in hand 1,478 1,160
------------- ------------
4,556 3,995
Creditors: amounts falling due within one year (17,013) (7,618)
------------- ------------
Net current liabilities (12,457) (3,623)
------------- ------------
Total assets less current liabilities 46,297 54,266
Creditors: amounts falling due after
more than one year (19,863) (21,239)
Provisions for liabilities and charges (289) (675)
-------------- -------------
Net assets 26,145 32,352
-------------- -------------
Capital and reserves
Called up share capital 13,527 13,527
Share premium account 11,186 11,186
Merger reserve 5,417 5,417
Revaluation reserve 15 15
Special reserve 4,564 4,564
Profit and loss account (8,564) (2,357)
----------- ------------
Shareholders' funds 26,145 32,352
----------- ------------
Consolidated cash flow statement (Unaudited)
9 months ended Year ended
31 December 31 March
2000 2000
#000 #000
Net cash outflow from operating
activities (3,354) (730)
Returns on investment and servicing of finance
Net interest paid (1,171) (671)
Taxation
Corporation tax paid (28) -
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,185) (3,007)
Sale of tangible fixed assets 81 935
-------------- -------------
(2,104) (2,072)
Acquisitions and disposals
Acquisition of subsidiaries - (24,181)
Net overdraft acquired with subsidiaries - (125)
------------- ------------
- (24,306)
Net cash outflow before financing (6,657) (27,779)
Financing
Issue of ordinary shares - 14,955
Expenses paid on issue of shares - (782)
Inception of loans 1,020 18,125
Repayment of loans (703) (4,135)
------------ ------------
317 28,163
------------ ------------
(Decrease)/increase in cash (6,340) 384
------------ ------------
Notes
1. The tax charge for the period is nil due to the availability of tax
losses.
2. The calculation of basic loss per share is based on the loss after tax of
#6,207,000 (31 March 2000 : loss after tax #2,964,000) and on 270,545,173
(31 March 2000: 244,290,884) ordinary shares, being the weighted average
number of ordinary shares in issue.
3. Reconciliation of operating loss to net cash flow from operating activities
9 months ended Year ended
31 December 31 March
2000 2000
#000 #000
Operating loss (5,036) (2,293)
Depreciation charges 1,004 808
Amortisation of goodwill 231 119
Loss/(profit) on disposal of tangible fixed assets 4 (91)
Increase in stocks (4) (50)
Increase in debtors (239) (108)
Increase in creditors 1,072 210
(Decrease)/increase in provisions (386) 675
------------ -----------
Net cash outflow from operating (3,354) (730)
activities
------------ -----------
4. Reconciliation of net cash flow movement to movement in net debt
9 months ended Year ended
31 December 31 March
2000 2000
#000 #000
(Decrease)/increase in cash in the period (6,340) 384
Cash received from inception of loans (1,020) (18,125)
Cash used to pay loans 703 4,135
------------- ------------
Change in net debt arising from cash flows (6,657) (13,606)
Loans acquired on acquisition - (2,023)
------------ ------------
Change in net debt during period (6,657) (15,629)
Opening net debt (21,028) (5,399)
------------ ------------
Closing net debt (27,685) (21,028)
------------ ------------
5. There have been no changes to the accounting policies of the Group as set
out in 31 March 2000 financial statements.
6. The financial information in this statement does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
figures for the year ended 31 March 2000 have been extracted from the
accounts which have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified. The statutory
accounts for 1998 and 1999 have been filed with the Registrar of
Companies and received an unqualified report. The 2000 audited accounts
will be sent to shareholders shortly.
Appendix C
The following definitions apply throughout this announcement, unless the
context otherwise requires:
"Arena" or Arena Leisure Plc
"the Company"
"Arena Group" Arena and its subsidiaries as at the date of this document
or "Group"
"Arena Shares" ordinary shares with a nominal value of 5p each in the share
or "Ordinary capital of Arena
Shares"
"Arena holders of Ordinary Shares
Shareholders"
"Arena Online" Arena Online Services Limited
"BBC" British Broadcasting Corporation
"BHB" British Horseracing Board
"Board" or the directors of Arena
"Directors"
"BskyB" British Sky Broadcasting Limited
"Channel Four" Channel Four Television Corporation
"Courses" the owners or controllers of the Racecourses
"Deutsche Deutsche Bank AG London
Bank"
"Go Racing" Attheraces Holdings Limited (a private limited company
incorporated in England)
"Go Racing Go Racing and its subsidiaries from time to time
Group"
"Go Racing the conditional committed loan facilities in the aggregate of #
Loan 80 million between Arena (as lender) and Go Racing plc and Go
Facilities" Racing (Gibraltar) (as borrowers)
"Go Racing Attheraces (Gibraltar) Limited (a private limited company
(Gibraltar)" incorporated in Gibraltar)
"Go Racing Attheraces plc (a public limited company incorporated in
plc" England)
"Go Racing Attheraces (UK) Limited (a private limited company incorporated
(UK)" in England)
"JV Agreement" the conditional joint venture agreement dated 2 May 2001 in
respect of Go Racing made between Go Racing, BSkyB, Channel Four
and Arena, details of which are set out in Appendix A of this
document
"Media Rights" the media and related rights to races held at the Racecourses
which are to be licensed pursuant to the Media Rights Agreement
"Media Rights the conditional agreement between Go Racing, Go Racing plc, the
Agreement" RCA and the Courses for the acquisition by Go Racing plc from
the Courses of certain media and related rights to races held at
the Racecourses
"ntl" ntl incorporated
"Racecourses" means the British horseracing courses that sign up to the Media
Rights Agreement on or before 11 May and include those listed in
Section 3 of Appendix A
"RCA" The Racecourse Association Limited
Appendix D
Go Racing plc
Press Release
3rd May 2001
GO RACING CLINCHES MEDIA-RIGHTS DEAL
Go Racing is delighted to confirm that, following the enthusiastic vote for
the consortium's contract by the RCA earlier this week, it has now reached the
necessary level of acceptances from Britain's 59 racecourses to trigger its
deal to acquire media and related rights to British racing.
As of today (3rd May 2001), Go Racing has received acceptances from
racecourses representing over 71 per cent. of betting turnover. As the RCA
confirmed, Go Racing believes it is important to ensure that the best solution
for British racing is achieved, with as many racecourses as possible of the 59
signing up. Go Racing is committed to achieving this and will be working with
these important racecourses between now and the deadline of 11th May 2001. The
final signature version of the contract will be distributed within 24 hours,
clearing the way for this groundbreaking deal to go forward once the full
contract conditions have been met.
Christopher Stoddart, Chief Executive Officer of Go Racing, said: "I am
delighted that we have had such a good level of acceptances so quickly from
the racecourses. We hope to be able to welcome most of the remaining
racecourses by 11th May to ensure we deliver the best solution for racing."
Note to Editors:
The racecourses that have signed the Racing Rights Contract are:
ASSOCIATION RACECOURSES
Terrestrial Aintree, Ascot, Ayr, Cheltenham, Chepstow, Chester, Doncaster,
Rights Group Epsom, Goodwood, Haydock, Kempton, Newbury, Newmarket, Newcastle,
Sandown, Uttoxeter, and York
(TRG)
Racecourse Carlisle, Huntingdon, Market Rasen, Nottingham, Warwick and
Holdings Wincanton
Trust
(RHT courses, which are also members of TRG include Aintree,
(RHT) Cheltenham, Epsom, Haydock, Kempton, Newmarket and Sandown)
Arena Folkestone, Lingfield, Southwell, Windsor, Wolverhampton and
Leisure Worcester
Northern Bath, Brighton and Hereford
Racing
(Northern Racing courses which are also members of TRG include
Chepstow, Newcastle and Uttoxeter)
Contact: Hannah Walker, Go Racing - 01522 722 811 or 07971 598 287
ENDS
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