ARE Arena Events Group Plc

 

TIDMARE 
 
RNS Number : 0813W 
Arena Leisure PLC 
12 November 2010 
 

12 November 2010 
 
ARENA LEISURE PLC 
 
INTERIM MANAGEMENT STATEMENT 
 
Arena Leisure Plc ('Arena' or the 'Group'), the UK's leading operator of 
horseracing fixtures which owns and operates seven racecourses in the UK 
comprising Doncaster, Royal Windsor, Lingfield Park, Wolverhampton, Folkestone, 
Southwell and Worcester, today announces its Interim Management Statement for 
the period from 1 July 2010 to 11 November 2010. Financial data in this 
announcement relates to the four month period from 1 July 2010 to 31 October 
2010 (the 'period') unless otherwise stated. 
 
Overview 
 
Arena has traded in line with expectations during the period.  The Group 
delivered improvements in public attendances, notably at the Ladbrokes St Leger 
festival, and a moderate recovery of hospitality business.  However, as 
previously indicated, the impact of fixture funding reductions as a result of a 
reduced Levy yield has impacted fixture profitability from July.  International 
media rights distribution, through Arena's 45.85% affiliate At The Races 
('ATR'), is now part of a unified UK and Ireland joint venture (GBI Racing) and 
has grown on trend in line with the first half of the year.  The performance of 
the newly opened Lingfield Park Marriott Hotel & Country Club, after a positive 
start during the summer months, is currently operating at the lower end of our 
range of expectations and is reflective of the weak hotel market.  Overall we 
expect to deliver a result for the full year in line with market expectations. 
 
The recent announcement by the Levy Board of a further GBP10m reduction in 2011 
industry funding will have an impact on all UK racecourses' profitability in 
that year.  This reduction is based on an estimate of the likely Levy yield and 
is made in the absence of an agreement for the 2011/12 scheme that has now been 
referred to the UK Government for determination.  At this time, therefore, there 
is a degree of uncertainty on the funding impact on Arena's racecourses in 2011. 
 
Trading Update 
 
During the period, Arena staged 97 fixtures.  This compares to 106 in 2009 when 
Arena received 13 unscheduled fixtures.  This brings the total staged for the 10 
months to 31 October 2010 to 285 fixtures (2009: 303).  The anticipated total 
fixtures for the full year remains at 353 (2009: 370).  Total attendance in the 
period across Arena's seven racecourses was 292,000 (2009: 279,000) and included 
a successful Ladbrokes St Leger festival in September at Doncaster Racecourse. 
The attendance over the four days of the festival was 60,000 (2009: 53,000) 
including a Saturday crowd of 30,000 (2009: 27,000).  For the 10 months to 31 
October 2010, the total attendance across the Group was up by 7,000 at 574,000 
(2009: 567,000) despite 20 less fixtures. Average attendance was 2,014 and 
represents an 8% increase over the prior year (2009: 1,871).  The recovery in 
the corporate and private hospitality business, which has and continues to be 
severely impacted by the economic conditions, was in line with the 15% 
improvement achieved in the first half of the year.  Hospitality spend per head 
on this increased volume remains low and, as in previous periods, margins have 
been protected through the success of our in-house catering operation which, in 
the 10 months to 31 October 2010, has delivered profit slightly ahead of that 
achieved in the corresponding period in 2009. 
 
Income from media rights to Licensed Betting Offices has continued to be 
resilient with the current five-year contract to 31 December 2011 being linked 
to inflation and with the numbers of runners in our races remaining strong.  In 
January 2012, the new five year contract with SIS that was announced in July 
2009 will commence.  For 2011, Arena has secured 353 fixtures, despite the 
further reductions in industry funding through the Levy.  The fixtures include 
48 twilight meetings on our all-weather tracks during the winter months that 
will receive limited industry funding and a further 37 fixtures that we will 
largely be self-funding.  We have a reasonable expectation that we will be able 
to secure a similar fixture list into 2012 and beyond. 
 
The Lingfield Park Marriott Hotel and Country Club opened on 10 May 2010 and has 
now completed six months of operation.  The quality of the development and 
service standards at the property are of a high level and we are pleased to have 
received positive recognition from customers and through an international design 
and architecture award.  Business from leisure packages, particularly golf 
related, and overnight stays following weekend racing was encouraging during the 
summer and the property is achieving a good average rate compared to its 
competitor set.  We have planned for the hotel to take three years to reach 
maturity, during which time conference, meetings and corporate business are 
expected to build to become a core revenue stream.  The hotel sector, 
particularly outside of London, has softened somewhat in recent months and this 
has impacted trading at Lingfield Park.  As a result, its overall performance 
for the year will now be at the lower end of our anticipated range. 
 
Development Projects 
 
In October, Arena submitted its masterplan proposal for the redevelopment of 
Folkestone Racecourse to Shepway District Council as part of the Council's 
process for drawing up its new Local Development Framework.  The proposal is 
designed to safeguard the long-term future of Folkestone Racecourse and entails 
a complete rebuild of the racecourse and the introduction of approximately 800 
residential units. We anticipate updating the market further in the first 
quarter of 2011. 
 
Wolverhampton Council has recently published a timetable for the tender and 
award of the small casino license that it was granted by central government in 
2008.  Tender applications will be invited in August 2011 with the final award 
expected in May 2012.  We will participate in the tender and our belief is that 
the mixed used scheme of casino, racecourse and an extension to the existing 
hotel will provide a compelling proposition. 
 
Industry Funding 
 
Earlier in the year it was announced that the Levy yield for the current scheme, 
which runs until 31 March 2011, was estimated to be GBP70m and that, as a 
result, the Levy Board had reduced funding levels to match this yield.  We 
previously indicated that the profit impact of these funding reductions to Arena 
would be GBP0.2m in the second half of 2010 and a further GBP0.8m in 2011. 
 
On 8 November 2010, the Levy Board announced a further GBP10m of reductions in 
budgeted expenditure for the 2011 calendar year.  However, revised funding 
allocations based on this new budget have not yet been published.  Immediately 
prior to this, it was announced that the Levy scheme for 2011/12 had been 
referred to the UK Government for determination following a failure by Racing 
and Bookmakers to reach agreement.  Previous determinations have typically taken 
around six months to finalise.  As the revised funding allocations for the new 
Levy Board budget have not yet been published, we have included our best 
estimates of the likely profit impact on Arena in our outlook for 2011.  Our 
estimate is based on an even sharing of the burden of the reductions across the 
industry. 
 
In light of the uncertainty regarding future Levy funding, the Group continues 
to closely monitor the situation.  The Board is considering a number of 
strategies open to it to optimise the various potential outcomes and deliver the 
best interests for Arena and its shareholders. 
 
Outlook 
 
Despite a challenging trading environment, Arena's core business has moved 
forward successfully in 2010.  Improved racecourse attendances together with 
good development of ATR's international media rights business have helped to 
mitigate the pressure on corporate spend and the impact of industry funding 
reductions.  The Lingfield Park hotel made a good start to trading through the 
summer but a softening of the market in recent months has impacted trading and 
it is anticipated that this will be the case at least for the remainder of the 
year. 
 
Although we remain cautious about the last two months of the year, particularly 
on hotel trading and non-racing events, we expect to deliver a full year result 
in line with market expectations. 
 
Arena remains well placed with its increasing diversification of income streams: 
notably through in-house catering, ATR media distribution, and the Lingfield 
hotel. However, the significant reduction in Levy yield, together with the added 
uncertainty of the 2011/12 scheme having been referred to the Government for 
determination, means that we expect another challenging year in 2011.  Based on 
the above it is difficult to anticipate material overall growth in 2011. 
 
 
Enquiries: 
 
+----------------------------------+----------------------------------+ 
| Arena Leisure Plc                | Tel: 020 7632 2080               | 
+----------------------------------+----------------------------------+ 
| Mark Elliott, Chief Executive    |                                  | 
+----------------------------------+----------------------------------+ 
| Tony Harris, Finance Director    |                                  | 
+----------------------------------+----------------------------------+ 
|                                  |                                  | 
+----------------------------------+----------------------------------+ 
| College Hill                     | Tel: 020 7457 2020               | 
+----------------------------------+----------------------------------+ 
| Justine Warren                   |                                  | 
+----------------------------------+----------------------------------+ 
| Matthew Smallwood                |                                  | 
+----------------------------------+----------------------------------+ 
 
 
Forward-looking statements 
 
This report may contain certain statements about the future outlook for Arena. 
Although we believe our expectations are based on reasonable assumptions, any 
statements about future outlook may be influenced by factors that could cause 
actual outcomes and results to be materially different. 
 
www.arenaleisureplc.com 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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