TIDMARE
RNS Number : 4869C
Arena Leisure PLC
08 March 2011
ARENA LEISURE PLC
Final results for the year ended 31 December 2010
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, Southwell, Wolverhampton, Folkestone and Worcester,
today announces audited final results for the year ended 31
December 2010.
Highlights
Financial performance:
-- Revenue of GBP64.0m (2009: GBP65.2m)
-- Adjusted profit before interest and tax* increased by 10.4%
to GBP5.4m (2009: GBP4.9m)
-- Profit before tax was GBP3.6m (2009: GBP4.1m)
-- Earnings per share were 1.02p (2009: 1.16p)
-- Proposed final dividend maintained at 0.38p per share (2009:
0.38p)
-- Net borrowings reduced by GBP6.5m to GBP39.8m (2009:
GBP46.3m)
* Adjusted to exclude gains on the disposal of assets (2010:
GBPnil, 2009: GBP0.4m)
Operational:
-- 352 fixtures staged in the year representing 25% of UK racing
fixtures (2009: 370 fixtures, 26%)
-- Total attendance at the Group's racecourses was 634,000
(2009: 639,000), marginally down reflecting the reduction in number
of fixtures staged
-- Average attendance increased by 4.2% to 1,800 ahead of the
market average growth of 3.4% and hospitality attendance increased
by 17.1% to 45,200 (2009: 38,600)
-- At The Races delivered a 163% increase in post-tax profit
contribution of GBP1.4m (2009: GBP0.5m)
-- Lingfield Park Marriott Hotel and Country Club opened in May
2010 after a GBP30m development programme
Recent developments and future growth:
-- 353 fixtures secured for 2011 (2010: 352 staged)
-- The Government's Levy determination for 2011/12 has been set
at GBP73.3m to GBP80.8m, securing funding for 2011 and setting a
platform for future stability
-- 2012 will bring the start of the new five-year SIS media
rights agreement, with an estimated total value of GBP106m and an
uplift in annual value of GBP10m
-- Successful tender to The London Organising Committee of The
Olympic Games and Paralympic Games to provide catering services at
the Eton Dorney and Greenwich Park venues in 2012, with an
estimated net profit contribution of GBP0.5m to GBP1.0m
-- Masterplan proposal for the redevelopment of Folkestone
Racecourse submitted to the local authority with a mixed-use scheme
incorporating 800 residential units
-- Lingfield Park Marriott Hotel and Country Club has made a
positive start to 2011
Mark Elliott, Chief Executive of Arena Leisure Plc,
commented:
"Arena has produced another solid performance this year. The
Group's increasing diversity of income streams has helped reduce
the impact of the on-going difficult trading conditions facing the
wider racing industry. Arena continues to demonstrate operational
excellence in its core business with industry-leading growth in
average attendances at our racecourses.
"Whilst we expect that 2011 is likely to be another challenging
year, current trading is in line with expectations and Arena
continues to maximise the various development opportunities
inherent within its portfolio. There is substantial upside to come
from the maturing of the Lingfield Park Marriott Hotel revenues and
the transformational media rights agreement with SIS which will
deliver significant income uplift over the five years from
2012.
"Arena remains extremely well positioned for growth into 2012
and beyond."
8 March 2011
Enquiries:
Arena Leisure Plc Today: 020 7457 2020
Mark Elliott, Chief Executive Thereafter: 020 7632
2080
Tony Harris, Finance Director
College Hill Tel: 020 7457 2020
Matthew Smallwood
Jamie Ramsey
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.
The preliminary results presentation will be available on
Arena's website at:
www.arenaleisureplc.com
Chairman's Statement
In my first year as Chairman, I am pleased to be able to report
growth in the underlying performance of our racecourse operations.
We have outperformed the market in growth in average attendances,
opened a new hotel, made significant progress on our Folkestone
Racecourse development plan, continued the success of our catering
operation and At The Races ('ATR') has taken a major step forward
in its profit contribution. From 2012, the new media rights
agreement with Satellite Information Services Ltd ('SIS') will
increase income from media rights by an estimated GBP10m per annum
and remains the obvious focus of the Group's growth story. In
addition, recent major capital investments, further operational
improvements and an increased return from the distribution of
international media rights through ATR will provide further
sustainable growth. Following the year-end we announced our first
major external catering contract as provider of catering services
at both the Eton Dorney and Greenwich Park venues for the Olympic
and Paralympic Games in 2012.
As a backdrop to Arena's performance and prospects, the
horseracing industry has recently experienced a major reduction in
the level of funding received from the Levy on bookmakers which,
when coupled with conditions in the UK economy, has exerted
considerable financial pressures on all of racing. The yield from
the Levy is estimated to fall to GBP64.8m in 2010/11 as a result of
the movement of internet and telephone betting 'offshore', the
impact of overseas betting operators and betting exchanges. The
Levy is fundamental to the support of horseracing in the UK and it
is our belief that all parties should seek to maintain it in a
modernised and restructured form. The recent determination by
Government of the basis of the 2011/12 scheme to deliver a yield of
GBP73.7m to GBP80.8m is encouraging in that it provides stability
for funding at least at the current level. In the longer term, it
will be important for the sustainability of the Levy for a future
solution to encompass offshore operators and betting exchanges and
their customers.
The Group's seven racecourses staged a total of 352 fixtures in
the year to 31 December 2010 (2009: 370) with the average
attendance increasing by an industry-leading 4.2% to 1,800 (2009:
1,727). Total attendance was 634,000 (2009: 639,000) including
60,000 people (2009: 53,000) attending the Ladbrokes St Leger
festival at Doncaster Racecourse. Hospitality attendance in 2010
increased by 17.1% to 45,200 (2009: 38,600) which is encouraging.
The UK racing industry reported total attendance across all
racecourses of 5.8 million, up from 5.7 million in 2009, with
average attendances up by 3.4% (2009: 0.0%).
For the full year, Arena's adjusted profit before interest and
tax was GBP5.4m, an increase of 10.4% from GBP4.9m in 2009 (before
a GBP0.4m gain on asset disposals). Arena's total revenue for 2010
was GBP64.0m, down GBP1.2m (2009: GBP65.2m) following a GBP3.8m
reduction in funding from the Levy which predominantly impacted
prize money in the year. Income from media rights provided into
licensed betting offices ('LBOs') was consistent at GBP11.6m (2009:
GBP11.6m), despite fewer fixtures being staged. Non-racing income
has grown to 11.9% (2009: 8.7%) and more than half of the growth
was generated by the Lingfield Park Marriott Hotel.
Profit before tax was GBP3.6m (2009: GBP4.1m, including a
GBP0.4m gain on asset disposals). Within this, the net finance
expense was GBP1.8m (2009: GBP1.2m), the increase of GBP0.6m being
due predominantly to the funding costs of the Lingfield Park
Marriott Hotel development no longer being capitalised as part of
the cost of construction following its opening in May. Basic
earnings per share were 1.02p (2009: 1.16p), down 12.1%,
principally as a result of this increased finance cost.
The first customers of the newly constructed Lingfield Park
Marriott Hotel and Country Club were welcomed in mid-May. The hotel
is the centre-piece of the GBP30m redevelopment of Lingfield Park
that creates the UK's first integrated hotel, golf, leisure and
racing complex. We are delighted with the physical product, service
levels and overall quality of this new addition to our portfolio
and are excited by the prospects of this complementary asset which
we expect to reach maturity through 2012 and into 2013. Pre-opening
costs in the year were GBP0.5m (2009: GBP0.2m), in-line with our
expectations.
In October, Arena submitted its masterplan proposal for the
redevelopment of Folkestone Racecourse to Shepway District Council
('SDC') as part of SDC'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. SDC is likely to report in the middle of 2011,
after which there will be an examination-in-public which is likely
to conclude in Spring 2012.
Arena's 45.85% affiliate, ATR, commenced its joint venture, GBI
Racing, on 1 March 2010 which provides a unified service for the
international distribution of media rights from all UK and Irish
racecourses. Cost savings from this combined operation, together
with associated income growth and improved performance in ATR's
website and TV channel businesses, resulted in Arena's share of
ATR's earnings increasing by 163% to GBP1.4m (2009: GBP0.5m). The
royalty payments made directly to the Group's racecourses by ATR
under the terms of the media rights agreement increased by over 40%
to GBP2.0m (2009: GBP1.4m).
The Board is pleased to announce that it is proposing a
maintained final dividend for 2010 of 0.38p per share (2009: 0.38p
per share). In line with our stated policy, no interim dividend was
paid during the year (2009: none).
I was appointed to the Board as Chairman on 19 May. My
predecessor, Raymond Mould had been Chairman of Arena for four
years, during which time the Group initiated its exciting real
estate strategy, established a successful in-house catering
function and secured a transformational agreement with SIS for the
supply of media rights post-2011. On behalf of the Board, I would
like to thank Raymond for his outstanding contribution to the
development of Arena. There were no other changes to the Board
during the year.
Since my appointment, I have come to appreciate even more the
exceptional dedication and professionalism of Arena's employees. In
my opinion, they are second to none in their commitment to
delivering an excellent product and service and I would like to
convey the thanks of the Board to each of them.
Looking forward, 2011 will be another challenging year primarily
as a result of the impact of the already announced reductions in
Levy funding. As a result, our expectation is that Group
profitability is unlikely to see a material uplift from 2010. I
have highlighted the strengths of the Arena business and my belief
is that the Group is extremely well placed to capitalise on future
growth through media rights, operational performance and further
estate development opportunities; 2012 will be an exciting year in
this respect.
David Thorpe
Chairman
7 March 2011
Chief Executive's Statement
In 2010 we continued to make good progress in all areas of our
strategy whilst maintaining our focus on racing operations and
further expanding our other income sources.
Overview
Operating results for the year ended 31 December 2010 were
encouraging in an environment that was heavily influenced by
external factors including: the continued challenging economic
conditions; the pressures on funding caused by the reduced Levy
yield from bookmakers; and extreme weather conditions in both the
early and latter parts of the year. Despite these challenges, we
have been able to increase underlying adjusted profit before
interest and tax* by 10.4% to GBP5.4m (2009: GBP4.9m). In so doing,
we have increased the profit contribution from racecourse
operations by 3.8% to GBP7.2m (2009: GBP7.0m)**. ATR has shown
excellent growth and contributed GBP1.4m to Arena through our
45.85% equity share (2009: GBP0.5m).
We have been able to improve average attendances, hospitality
revenues and catering profits in 2010. The race-day experience that
we offer continues to evolve with our high-quality catering
offering proving an ever more important element in differentiating
our raceday customer experience. Themed racedays, be they the more
traditional 'Ladies Day' or newer 'Racing and Music' nights,
'Family Fundays' or other specific events, have proved increasingly
popular. These events not only provide a broader appeal for the
racegoer but also allow us to target our marketing activities in a
consumer-specific way. We have further plans in place for 2011 to
build on this success with additional themed days and an evolution
of our marketing approach, including online through our website and
social media channels, with greater customer relationship
management.
Arena's racing operations are recognised for their quality and
for the professionalism and dedication of our racing staff. These
strengths, combined with the flexibility of our three all-weather
racecourses, enabled the Group to stage 352 fixtures in the year
across our seven racecourses, including during periods of severe
adverse weather. During December 2010, 48% of scheduled UK racing
was lost to the weather conditions. However, Arena staged the
expected number of fixtures with six abandonments being replaced
with six extra fixtures at short notice. In total, we lost 18
fixtures in the year (2009: eight) and staged 14 extra fixtures at
short notice (2009: four). The net impact of December weather
conditions on Arena's profit was a GBP0.3m reduction as a result of
a 14,000 fall in total attendance compared to the prior year and a
number of cancelled non-racing meetings and events.
Our in-house catering operation is fully integrated into each
racecourse, allowing us to utilise synergies across each site and
align revenue generation. On a group-wide basis we are able to
leverage expertise through shared resources and purchasing power
through national supplier contracts. Quality of product and
service, one of the key drivers of our in-house strategy, has
continued to improve from an already high level.
On 10 February 2011, we announced that Arena had successfully
tendered to The London Organising Committee of The Olympics Games
and Paralympic Games ('LOCOG') and had been awarded the contract to
provide catering services at both the Eton Dorney and Greenwich
Park venues as part of the Olympic and Paralympic Games in 2012.
Eton Dorney will be home to the sprint canoeing and rowing events
and Greenwich Park will be home to the equestrian and modern
pentathlon events. The contract contains elements of both fixed
income and variable income that is dependent upon the numbers of
attendees and spend per head. The Board currently estimates that
Arena's 2012 net profit contribution from the contract will be in
the range of GBP0.5m to GBP1.0m.
* Adjusted to exclude gains on the disposal of assets (2010:
GBPnil, 2009: GBP0.4m)
** Before the impact of pre-opening costs of the Lingfield Park
Marriott Hotel development of GBP0.5m (2009: GBP0.2m)
Media rights
Arena licenses the right to use the media content of racing from
its racecourses through two main channels: to LBOs in the UK and
Ireland; and internationally, online and via non-terrestrial TV
through ATR. Revenue from these rights amounted to GBP13.6m (2009:
GBP13.0m) and represents 21.3% of total revenue (2009: 19.9%).
The Group has secured 353 scheduled fixtures for 2011 and we
have a reasonable expectation that we will be able to secure a
similar fixture list for 2012 and beyond. Each of these fixtures
will generate income from the LBO market which, from 1 January
2012, will arise pursuant to a new five-year contract with SIS. The
Board has estimated that this new contract will have a total value
of GBP106m over its term, which compares to the current five-year
contract that will have delivered an estimated GBP55.6m of income
to Arena between 2007 and 2011. Advanced payments of GBP12.5m were
received by Arena on both 22 July 2009 and 22 July 2010. A third
payment of GBP7.0m is due on 22 July 2011. The balance of the
estimated revenue is due over the five-year term and is linked to
the number of races run at Arena's racecourses.
Real estate development
Arena has been successful in achieving planning permissions and
executing developments that both enhance racecourse assets and
create value from surplus land. During 2010 the most recent of
these developments was completed and the Lingfield Park Marriott
Hotel and Country Club opened in May after a GBP30m investment.
The Group is currently pursuing development projects at four
other racecourses:
-- In October 2010, Arena submitted its master-plan proposal for
the redevelopment of Folkestone Racecourse to Shepway District
Council as part of SDC's process for drawing up its new Local
Development Framework. The safeguards the long-term future of the
Racecourse via a complete rebuild of the Racecourse, funded by the
introduction of approximately 800 residential units. SDC is likely
to report in the middle of 2011, after which there will be an
examination-in-public which is likely to conclude in Spring
2012;
-- Wolverhampton Racecourse has planning consent for a combined
hotel and casino development that extends the existing hotel from
54 to 170 bedrooms. This project is dependent upon the grant of a
small casino licence from Wolverhampton City Council. It is
anticipated that tender applications will be invited for this
licence in August 2011, with the final award expected in Summer
2012. We will participate in the tender and our belief is that the
mixed-use scheme of casino, racecourse and an extension to the
existing hotel will provide a compelling proposition;
-- Doncaster Racecourse has planning consent for a 120-bedroom
hotel and 34 residential units. This consent was recently extended
until mid-2013. The Board remains confident of the commercial
viability of this scheme and of its complementary nature to the
existing facilities; and
-- At Royal Windsor Racecourse the first part of a medium-term
redevelopment programme commenced with the construction of a new
entrance building housing offices and a food outlet. There will
also be an expansion and refurbishment of the weighing room and
jockeys' facilities. This first phase project is expected to cost
GBP1.0m and complete in time for the 2011 racing season.
Industry funding
Reductions in funding from the Levy are having a major impact on
racecourses and all participants in the racing industry. The yield
from the Levy on bookmakers has fallen from GBP75.4m in 2009/10 to
an estimated GBP64.8m in 2010/11, with a consequent impact on the
funds distributed to racing. Arena suffered a reduction in funding
for 2010 which had a GBP0.3m profit impact through reduced direct
incentive payments and prize money contributions which were then
supplemented by Arena. As previously announced, the impact on 2011
is more significant, with further reductions to fixture incentive
payments of GBP0.8m and reductions in payments to support
operational running costs of GBP0.7m, both of which will directly
impact profit. The Levy Board has also taken the unusual step in
making certain fixtures available with either no or partial funding
for prize money. Arena has secured 48 partially funded fixtures and
36 fixtures with no funding for prize money which, whilst each of
these will still be profitable and are important in maintaining our
fixture list, will be consequently less profitable than fully
funded fixtures.
The racing industry and bookmakers failed to reach agreement on
the form of the Levy scheme for 2011/12 and so it was referred to
Government for 'determination'. On 16 February 2011, a statement
from the Minister responsible set out the new terms. These are
estimated to deliver a yield of GBP73.7m to GBP80.8m which would be
above the level of the current 2011 budgeted Levy expenditure of
GBP60.0m. Our expectation is that this uplift will predominantly
benefit prize money, which will assist in improving race
programmes, and/or Levy Board reserves and will therefore have
minimal short-term impact on racecourse profitability. Over the
medium term it will help to protect growth. Maintenance of the Levy
in a revised form is considered important by the Arena Board and in
the medium term we are seeking a solution that addresses offshore
operators and betting exchanges and their customers which have so
far not been addressed by the current 'determination'.
Operations
Some recovery in market conditions and a continued focus on the
customer offering and marketing of lead promotions resulted in
improvements in attendances. Average attendance, across all seven
racecourses, increased by 4.2% to 1,800 (2009: 1,727) and total
hospitality attendance increased by 17.1% to 45,200 (2009: 38,600).
Total attendance was 634,000 which is slightly less than the
639,000 in 2009 as a result of fewer fixtures being held. A total
of 352 fixtures were staged in 2010 which was 18 less than in 2009
when the closure of Great Leighs Racecourse resulted in additional
fixtures being transferred to Arena courses at short notice. Arena
has again staged over one-quarter of all UK racing fixtures (2010:
25%, 2009: 26%).
Of Arena's scheduled fixtures, 18 were abandoned during the year
(2009: eight, 2008: seven) which represents an unusually high
number and was a result of the severe weather conditions during
both the early part of the year and the last five weeks of 2010,
during which time eleven and seven race meetings were lost,
respectively. Due to the capacity of our all-weather tracks and the
dedication of our staff, we are able to stage extra fixtures at
short notice and 14 extra fixtures were hosted in 2010 (2009:
four), of which six were in December. Attendances throughout
December at both the extra and the scheduled fixtures were 14,000
less than 2009 and the resulting adverse impact on profit was
approximately GBP0.3m.
As has already been described, the Levy yield suffered a
significant reduction in the year resulting in cuts to the
distributions to racecourses. The overall contribution to Arena's
racecourses reduced by GBP3.8m to GBP17.7m (2009: GBP21.5m), which
resulted in a GBP0.3m negative impact on profitability (2009:
GBPnil). Income from LBO-related media rights of GBP11.6m remained
at the same level as the prior year (2009: GBP11.6m). Whilst the
LBO contract benefits from an inflationary adjustment, the number
of fixtures, and hence races staged, were less than in 2009
resulting in no net increase.
In May, the Lingfield Park Marriott Hotel and Country Club
opened for business. The hotel operation is integrated with the
Racecourse with a long-term business plan that is based on mixed
leisure, corporate and events-based incomes. Initial trading
through the summer months was in line with our expectations, with
good golf and racing-related business. The last quarter proved more
challenging due principally to market conditions. Pre-opening costs
of the hotel operation were GBP0.5m (2009: GBP0.2m), as
expected.
Arena's racecourse operation delivered an operating profit of
GBP6.8m in the year (2009: GBP6.8m), after the impact of the hotel
pre-opening costs. Excluding these hotel pre-opening costs, the
racecourse contribution has increased by 3.8% to GBP7.2m (2009:
GBP7.0m). Within this, the impact of reduced Levy funding and the
December weather-affected trading was a cumulative negative
GBP0.6m. Admissions-related incomes, royalties from international
media rights and the first trading period of the new hotel together
produced a net increase in profit of GBP0.8m.
At The Races ('ATR')
ATR is the UK and Ireland's most watched, dedicated horseracing
channel and is available in 14 million homes. The channel reaches
up to 2 million individuals each month with a regular daily
audience of over 400,000 and a peak of 560,000 that was recorded in
November 2010 during the Breeders' Cup coverage. Advertising
revenues again performed well in 2010 thanks to the strong
fundamentals behind ATR's audience profile.
The website 'attheraces.com' is the premier racing and betting
website in the UK and Ireland. During 2010, it has achieved
significant uplifts in its monthly usage, reaching a peak of
975,000 unique users in October (2009: 650,000).
In March 2010, ATR commenced its joint venture with Racecourse
Media Group for the international distribution of all UK and Irish
racing. This joint venture, GBI Racing, pools the respective rights
of the two entities and provides a unified broadcast service for
British and Irish racing in important pari-mutuel markets such as
Italy, France, South Africa, Turkey and Australia, as well as
further developing opportunities in newer markets such as
Singapore, Malaysia and Hong Kong. In 2010 the joint venture
delivered better than expected cost savings of GBP0.6m for ATR and
increased revenues, thereby contributing to the overall excellent
result of ATR in the year.
In the year to 31 December 2010 ATR generated an operating
profit of GBP2.5m (2009: GBP1.4m) from revenue of GBP19.2m (2009:
GBP16.1m) and a gross profit of GBP11.8m (2009: GBP10.2m).
Operating profit was recorded after payments to racecourses of
GBP4.2m (2009: GBP3.1m). Arena's share of post-tax profit was
GBP1.4m (2009: GBP0.5m).
Capital expenditure
During the year GBP9.1m was invested on capital assets (2009:
GBP19.2m). Of this, GBP7.6m (2009: GBP17.6m) was incurred on the
Lingfield Park Marriott Hotel development bringing the total
completed spend to GBP30.0m. Of the remaining GBP1.5m, GBP0.4m
related to the commencement of the first phase of the development
of Royal Windsor Racecourse featuring a GBP1.0m project that will
improve racecourse facilities and provide a new entrance building
including office and retail space. Capital additions include
GBP0.8m (2009: GBP0.7m) of interest costs related to development
projects during the planning and construction phases.
Having completed the Lingfield Park Marriott Hotel development
and pending the commencement of construction on the other major
development schemes, Arena will utilise operating cashflows in 2011
to substantially reduce net borrowings.
Outlook
Despite a challenging trading environment, Arena's core business
moved forward successfully in 2010. Improved average racecourse
attendances, together with good development of ATR's international
media rights business, have helped to mitigate the continuing
pressure on corporate spend and the impact of reduced industry
funding.
Arena remains well placed with its increasingly diversified
income streams, notably through: in-house catering, ATR media
distribution and the Lingfield Park Marriott Hotel. However, due to
the significant reduction in Levy yield we expect another
challenging year and, on that basis, we do not anticipate material
overall growth in 2011. Trading in the current year to date is in
line with these expectations. With the significant successes
achieved over the last few years, the prospects for 2012 are
significantly brighter.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2010
Separately Separately
2010 disclosed 2010 2009 disclosed 2009
Trading items Total Trading items Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ---- -------- ---------- -------- -------- ---------- --------
Revenue 4 63,983 - 63,983 65,239 - 65,239
Cost of sales (46,897) - (46,897) (47,749) - (47,749)
----------------- ---- -------- ---------- -------- -------- ---------- --------
Gross profit 17,086 - 17,086 17,490 - 17,490
Other operating
income 5 - - - - 418 418
Administrative
costs (13,024) - (13,024) (13,101) - (13,101)
Profit from
operations 4,062 - 4,062 4,389 418 4,807
Share of post-tax
results of joint
venture 1,352 - 1,352 515 - 515
----------------- ---- -------- ---------- -------- -------- ---------- --------
Profit before
interest and
taxation 5,414 - 5,414 4,904 418 5,322
----------------- ---- -------- ---------- -------- -------- ---------- --------
Finance expense 6 (2,058) - (2,058) (1,659) - (1,659)
Finance income 6 141 126 267 456 2 458
----------------- ---- -------- ---------- -------- -------- ---------- --------
Net finance
expense 6 (1,917) 126 (1,791) (1,203) 2 (1,201)
----------------- ---- -------- ---------- -------- -------- ---------- --------
Profit before
taxation 3,497 126 3,623 3,701 420 4,121
Income tax
expense 7 - - - - - -
----------------- ---- -------- ---------- -------- -------- ---------- --------
Profit for the
year and total
comprehensive
income 3,497 126 3,623 3,701 420 4,121
----------------- ---- -------- ---------- -------- -------- ---------- --------
Attributable to:
- Equity
shareholders
of the
parent
company 3,605 126 3,731 3,793 420 4,213
- Non-controlling
interest (108) - (108) (92) - (92)
----------------- ---- -------- ---------- -------- -------- ---------- --------
3,497 126 3,623 3,701 420 4,121
----------------- ---- -------- ---------- -------- -------- ---------- --------
Pence Pence
-------------------- ----- -----
Earnings per share:
Basic earnings per
share 8 1.02 1.16
Diluted earnings
per share 8 1.02 1.16
-------------------- ----- -----
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 31 December 2010
Total equity
before Non -
Share Share Merger Retained non-controlling controlling Total
capital premium reserve earnings interest interest equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
At 1 January
2009 (As
reported)* 18,210 223 5,417 46,985 70,835 1,809 72,644
Impact of
change in
accounting
policy* - - - (10) (10) - (10)
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
At 1 January
2009
(Restated)* 18,210 223 5,417 46,975 70,825 1,809 72,634
Profit for the
year and total
comprehensive
income - - - 4,213 4,213 (92) 4,121
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
Transactions
with owners:
- Share-based
payment - - - (28) (28) - (28)
- Dividends
paid 9 - - - - - - -
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
Total
transactions
with owners - - - (28) (28) - (28)
Impact of
change in
accounting
policy* 2 - - - 2 2 - 2
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
At 31 December
2009
(Restated)* 18,210 223 5,417 51,162 75,012 1,717 76,729
Profit for the
year and total
comprehensive
income - - - 3,731 3,731 (108) 3,623
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
Transactions
with owners:
- Share-based
payment - - - 320 320 - 320
- Dividends
paid 9 - - - (1,384) (1,384) - (1,384)
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
Total
transactions
with owners - - - (1,064) (1,064) - (1,064)
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
At 31 December
2010 18,210 223 5,417 53,829 77,679 1,609 79,288
--------------- ---- ------- ------- ------- -------- --------------- ----------- -------
* - Relates to a change in the accounting policy for leased
assets. See Note 2 for further information. Consolidated Balance
Sheet
at 31 December 2010
2009
2010 Restated*
Note GBP'000 GBP'000
-------------------------------- ---- -------- ---------
Non-current assets
Property, plant and equipment 10 140,685 135,646
Intangible assets 6,072 6,035
-------------------------------- ---- -------- ---------
Investment in joint venture
- Share of gross assets 4,028 3,307
- Share of gross liabilities (5,535) (6,166)
-------------------------------- ---- -------- ---------
(1,507) (2,859)
Goodwill in respect of joint
venture 1,580 1,580
Loans to joint venture 4,308 4,754
-------------------------------- ---- -------- ---------
4,381 3,475
Total non-current assets 151,138 145,156
-------------------------------- ---- -------- ---------
Current assets
Inventories 471 422
Trade and other receivables 13,238 4,848
Cash and cash equivalents 12 3,099 351
-------------------------------- ---- -------- ---------
Total current assets 16,808 5,621
-------------------------------- ---- -------- ---------
Total assets 167,946 150,777
-------------------------------- ---- -------- ---------
Current liabilities
Bank overdraft 12 - (1,874)
Trade and other payables (5,821) (6,750)
Loans and borrowings 12 (11,242) (12,853)
Accruals and deferred income 11 (4,618) (4,751)
-------------------------------- ---- -------- ---------
Total current liabilities (21,681) (26,228)
-------------------------------- ---- -------- ---------
Non-current liabilities
Loans and borrowings 12 (31,669) (31,924)
Accruals and deferred income 11 (35,308) (15,896)
-------------------------------- ---- -------- ---------
Total non-current liabilities (66,977) (47,820)
-------------------------------- ---- -------- ---------
Total liabilities (88,658) (74,048)
-------------------------------- ---- -------- ---------
Total net assets 79,288 76,729
-------------------------------- ---- -------- ---------
Equity
Share capital 18,210 18,210
Share premium 223 223
Merger reserve 5,417 5,417
Retained earnings 53,829 51,162
-------------------------------- ---- -------- ---------
Equity attributable to shareholders
of the parent company 77,679 75,012
Non-controlling interest 1,609 1,717
-------------------------------- ---- -------- ---------
Total equity 79,288 76,729
-------------------------------- ---- -------- ---------
* - Relates to a change in the accounting policy for leased
assets. See Note 2 for further information.
Consolidated Cash Flow Statement
for the year ended 31 December 2010
2010 2009
Note GBP'000 GBP'000
----------------------------------------- ----- --------- ---------
Cash flows from operating activities
Profit for the year 3,623 4,121
Adjustments for:
Depreciation 3,786 3,479
Share-based payment expense/(credit) 320 (28)
Net finance expense 6 1,791 1,201
Share of profit of joint venture (1,352) (515)
Profit on sale of property, plant
and equipment (31) (420)
Grant amortisation (72) (74)
----------------------------------------- ----- --------- ---------
Cash flows from operating activities
before changes in working capital
and provisions 8,065 7,764
(Increase)/decrease in trade and
other receivables (8,390) 567
(Increase)/decrease in inventories (49) 122
Increase in trade and other payables 18,857 11,227
----------------------------------------- ----- --------- ---------
Net cash from operating activities 18,483 19,680
Cash flows from investing activities
Purchases of property, plant and
equipment (8,554) (20,385)
Proceeds from sale of property, plant
and equipment 295 625
Additions to intangibles (37) (27)
Decrease in loans to joint venture 515 300
Interest received 72 367
----------------------------------------- ----- --------- ---------
Net cash used in investing activities (7,709) (19,120)
Cash flows from financing activities
Proceeds from bank and other borrowings 38,987 3,900
Capital grants received - 98
Repayment of loans (41,120) (3,237)
Repayment of finance lease liabilities (119) (45)
Interest paid (2,516) (1,975)
Dividends paid (1,384) -
----------------------------------------- ----- --------- ---------
Net cash from financing activities (6,152) (1,259)
Increase/(decrease) in cash and cash
equivalents 4,622 (699)
Net cash and cash equivalents at
beginning of year (1,523) (824)
----------------------------------------- ----- --------- ---------
Net cash and cash equivalents at
end of year 3,099 (1,523)
----------------------------------------- ----- --------- ---------
Notes forming part of the financial statements
1. Reporting entity
Arena Leisure Plc ('the Company') is a company domiciled in the
UK. The address of the Company's registered office is 408 Strand,
London WC2R 0NE. The consolidated financial statements of the
Company as at and for the year ended 31 December 2010 comprise the
Company and its subsidiaries (together referred to as 'the Group')
and the Group's interest in jointly controlled entities. The Group
is primarily involved in the ownership and operation of
racecourses, and the worldwide broadcast and exploitation of
racecourse media rights via the Group's shareholding in its At The
Races joint venture.
2. Basis of preparation
Statement of compliance
The Group financial statements ('financial statements') have
been prepared and approved by the Directors in accordance with
International Financial Reporting Standards as adopted by the EU
('Adopted IFRS').
The auditors' report on the statutory accounts for the year
ended 31 December 2010 was: (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The financial information set out in this statement does not
constitute the Group's statutory accounts for the year ended 31
December 2010. Statutory accounts for the year ended 31 December
2009 have been delivered to the Registrar of Companies. The
auditors' report on the statutory accounts for the year ended 31
December 2009 was: (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The consolidated financial statements of the Group as at and for
the year ended 31 December 2009 are available on the Company's
website: www.arenaleisureplc.com.
The financial statements were approved by the Board of Directors
on 7 March 2011.
Going concern
The Group continues to be a cash-generative operational business
with good quality assets. Revenues are generated from a variety of
sources including industry funding through the Horserace Betting
Levy Board ('HBLB') and income from its five-year (to 31 December
2011) BAGS media rights contract to provide live racing pictures to
UK licensed betting offices. In addition, on 22 July 2009, the
Group signed a new five-year agreement commencing on 1 January 2012
for the provision of media rights with Satellite Information
Services Ltd ('SIS') that provides for GBP32.0m in advance
payments, of which GBP25.0m has already been received and the
balance of GBP7.0m is secured by letter of credit.
In March 2010, the Group agreed new banking facilities with its
relationship lender, Lloyds Banking Group, totalling GBP55.0m that
replaced existing bank facilities and which are committed until,
and amortise to maturity on, 31 December 2013.
Although the current economic conditions create uncertainty,
particularly over funding levels from the Levy on bookmakers, the
Group's forecasts and projections, taking account of reasonably
possible changes in trading performance, together with mitigating
actions that are within management's control, the Group is expected
to be able to operate within the level and covenant conditions of
its new debt facilities.
The Directors have a reasonable expectation that the Company and
Group have adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and
accounts.
Change in accounting policy: leased assets
From 1 January 2010 the Group has applied Improvements to IFRS
(issued by IASB April 2009), which includes amendments to IAS 7
'Leases'. The change in accounting policy has resulted in the land
in respect of the Doncaster Racecourse lease being recognised as a
finance lease, where previously it was recognised as an operating
lease. The change has been applied retrospectively and, in
accordance with IAS 8, the prior year balance sheet figures have
been restated, with the net effect of GBP8,000 recognised in
equity. The impact of the change in 2010 is a GBP2,000 reduction in
profit for the year.
3. Estimates
The preparation of consolidated financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
4. Segment information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Board
of Directors of Arena Leisure Plc. The segment information set out
below is consistent with the information presented to the Board for
the purposes of evaluating performance and deciding upon resource
allocation.
The Group has one reportable operating segment: racecourse
operations. This business segment arises in the UK.
Additional information on this segment is as follows:
Racecourse operations Total
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- -------- --------
Total external revenue 63,983 65,239 63,983 65,239
-------------------------------- ----------- ----------- -------- --------
Segment profit from operations 7,247 6,985 7,247 6,985
Pre-opening costs associated
with Lingfield Park Marriott
Hotel development (484) (163) (484) (163)
-------------------------------- ----------- ----------- -------- --------
Segment profit from operations
before asset disposals 6,763 6,822 6,763 6,822
Other operating income - 418 - 418
-------------------------------- ----------- ----------- -------- --------
Segment profit from operations 6,763 7,240 6,763 7,240
Central operations - - (2,381) (2,461)
Share based payment - - (320) 28
Share of joint venture result - - 1,352 515
Finance income - - 267 458
Finance expense - - (2,058) (1,659)
-------------------------------- ----------- ----------- -------- --------
Profit for the year 6,763 7,240 3,623 4,121
-------------------------------- ----------- ----------- -------- --------
The Group derives a significant proportion of its annual revenue
from the Levy and from its LBO media rights agreement with BAGS, as
disclosed below:
2010 2009
GBP'000 GBP'000
--------------------------------------------- -------- --------
Levy 17,727 21,542
Media rights income in relation to licensed
betting offices ('LBO') 11,611 11,628
Other racecourse-related revenue 34,645 32,069
--------------------------------------------- -------- --------
Total external revenue 63,983 65,239
--------------------------------------------- -------- --------
5. Other operating income
In November 2009 Arena sold the land and buildings and fixtures
and fittings associated with the Lingfield Park leisure club for
GBP615,000, resulting in a profit on disposal of GBP418,000.
6. Finance income and expense
2010 2009
GBP'000 GBP'000
----------------------------------------------- -------- --------
Finance income
Bank interest receivable 72 367
Other interest receivable 69 89
Derivative liability held for risk management 126 2
----------------------------------------------- -------- --------
267 458
----------------------------------------------- -------- --------
Finance expense
Bank interest payable (1,672) (1,240)
Finance lease interest (113) (64)
Amortisation of previous gain on present
value of interest-free loans (273) (355)
(2,058) (1,659)
----------------------------------------------- -------- --------
Net finance expense (1,791) (1,201)
----------------------------------------------- -------- --------
The valuation of the Group's interest rate derivative contracts
at 31 December 2010 has resulted in a liability of GBP1,328,000
(2009: GBP1,454,000) being recorded on the balance sheet and a
credit of GBP126,000 (2009: GBP2,000) to the statement of
comprehensive income.
A further GBP844,000 (2009: GBP735,000) of interest costs
relating to development projects in progress have been capitalised
in the year.
7. Taxation
There is no current year tax charge (2009: no tax charge) mainly
due to the utilisation of HBLB capital credits which are not
assessable to tax. At 31 December 2010, corporation tax losses
representing trading and non-trading losses of GBP64,363,000 (2009:
GBP63,988,000) were available for utilisation in future years,
subject to agreement with HM Revenue & Customs.
The Directors have recognised a deferred tax liability on
temporary differences of GBP13,308,000 (2009: GBP12,715,000). In
addition, the Directors have also recognised a deferred tax asset
for losses of GBP13,308,000 (2009: GBP12,715,000).
8. Earnings per share
2010 2009
GBP'000 GBP'000
-------------------------------------------- -------- --------
Earnings
-------------------------------------------- -------- --------
Profit for the year attributable to equity
shareholders of the parent company 3,731 4,213
-------------------------------------------- -------- --------
2010 2009
Number Number
million million
-------------------------------------------- -------- --------
Weighted average number of shares
-------------------------------------------- -------- --------
Weighted average number of shares used in
the calculation of basic and adjusted EPS 364.2 364.2
-------------------------------------------- -------- --------
Dilutive potential ordinary shares
Employee share options - -
-------------------------------------------- -------- --------
Weighted average number of shares used in
the calculation of diluted EPS 364.2 364.2
-------------------------------------------- -------- --------
Certain employee options have not been included in the
calculation of diluted EPS because their exercise is contingent on
the satisfaction of specific criteria that had not been met at the
end of the year. In addition, certain employee options have also
been excluded from the calculation of diluted EPS as their exercise
price is greater than the weighted average share price during the
year (i.e. they are out-of-the-money) and therefore would not be
dilutive. The total number of share options excluded in 2010 was
4.30 million (2009: 4.58 million).
The average market value of the Company's shares for the
purposes of calculating the dilutive effect of share options was
based on quoted market prices for the period that the options were
outstanding.
9. Dividends
2010 2009
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Final dividend of 0.38p (2009: nil) per ordinary 1,384 -
share proposed and paid during the year relating
to the previous year's results
--------------------------------------------------- -------- --------
The Directors propose to pay a final dividend for 2010 of 0.38p
per ordinary share totalling GBP1,384,000 (2009: 0.38p per ordinary
share totalling GBP1,384,000). This will be recognised as a
deduction to reserves in the current financial year.
10. Property, plant and equipment
During the year ended 31 December 2010 the Group acquired assets
with a cost of GBP9,089,000 (2009: GBP19,200,000).
The Group has capitalised costs in relation to continuing
development projects at Doncaster, Lingfield Park, Royal Windsor,
Folkestone and Wolverhampton Racecourses. The Board considered the
carrying value of assets under construction at 31 December 2010 and
31 December 2009 and concluded that no impairment provisions are
required.
At 31 December 2010, the Group's commitments to purchase
property, plant and equipment totalled GBP282,000 (2009:
GBP409,000).
11. Accruals and deferred income
Included within deferred income is a GBP12,500,000 advanced
payment received from SIS in July 2009 upon signing a new agreement
for the provision of horse racing content from Arena's racecourses
into licensed betting offices in the United Kingdom and Ireland and
two other amounts in relation to the same agreement: a further
GBP12,500,000 advanced payment received in July 2010 and
GBP7,000,000 due for payment in July 2011 which has been invoiced
and is included within trade receivables. The income deferred will
be recognised in profit and loss on a straight-line basis over the
five-year term of the agreement, which commences on 1 January 2012,
and is classed as non-current.
12. Statement of net debt
2009
2010 Restated*
GBP'000 GBP'000
-------------------------------------------- --------- -----------
Cash and cash equivalents 3,099 351
Bank overdrafts - (1,874)
-------------------------------------------- --------- -----------
Net cash and cash equivalents 3,099 (1,523)
Bank loans (38,987) (39,500)
HBLB loans (present value of interest-free
loans) (2,913) (4,260)
Finance lease liabilities (Doncaster and
Worcester Racecourses) (1,011) (1,017)
-------------------------------------------- --------- -----------
(39,812) (46,300)
-------------------------------------------- --------- -----------
13. Events after the reporting date
On 10 February 2011, Arena was awarded the contract to provide
catering services at both the Eton Dorney and Greenwich Park venues
as part of the Olympic and Paralympic Games in 2012. The contract
contains elements of both fixed income and variable income that is
dependent upon the numbers of attendees and spend per head. The
Board currently estimates that the net profit contribution from the
contract in 2012 will be in the range of GBP0.5m to GBP1.0m.
Principal Risks
Arena regularly reviews on-going and potential risks which may
impact upon the planned execution of strategy and operational
performance with a consequential impact on value. In so doing,
management and the Board ensure that appropriate systems,
procedures and controls are in place to mitigate the occurrence and
impact of such risks.
Commercial and operational risk
Arena's business is exposed to weaknesses in consumer spend,
particularly in the private hospitality segment. Over recent years
the contribution from this segment has reduced dramatically with a
consequent reduction in profitability. Current trading levels are
considered moderate and hence operational risk is less than in
previous years. Economic conditions have caused a reduction in the
levels of spend per head at racecourses and have impacted the
Group's non-racing business streams, notably through conference,
event and hotel revenues. Poor weather conditions can impact
income, both from attendances and, in extreme cases, hosting of
fixtures, resulting in a loss of profitability.
Management have taken mitigating actions to protect Arena from
current and potential operational risks:
-- The operating cost base has been aligned with reduced
customer revenue and the operating synergies arising from bringing
our catering operation in-house have protected profits;
-- The Group has appointed suitably experienced and qualified
senior management to oversee and direct the operation and standards
of performance across all of Arena's racecourses;
-- Appropriate systems and structures are in place to ensure
proper training and supervision of staff and management information
systems monitor performance on a regular basis against
predetermined targets;
-- Arena has made a significant investment in information
technology, covering key business areas and in particular:
reservations, ticketing and points of sale and customer
relationship management. These systems are substantially embedded
assets with a consequent improvement in the control environment of
the Group; and
-- The Group's three all-weather tracks provide significant
protection against the loss of fixtures due to bad weather. In
extreme weather conditions fixtures can be lost, although it is
often the case that additional fixtures can be staged at short
notice, thereby mitigating the potential loss.
Industry funding
A significant proportion of the Group's annual income is derived
from the statutory Levy on bookmakers' profits from UK horseracing.
The scheme has suffered significant reductions in yield with a
consequent reduction in funding levels. Further reductions could be
possible if a higher proportion of betting on UK racing moves to
betting exchanges or offshore with reduced or no capture of revenue
by the Levy. There is a risk that a replacement for the Levy or
further reductions in the amount generated may have a detrimental
impact on income. 2011 funding levels have been set at a relative
minimum level and the downside risk is considered low. The
determination of the 2011/12 scheme by Government is at a
sustainable level that is above the current budgeted level.
Government has expressed its intention to reform the Levy to avoid
future determinations and provide a long-term sustainable
mechanism. There is a high level of involvement of Arena management
in the key industry bodies.
A significant proportion of Arena's annual income is derived
from its contract for the supply of racing content to LBOs. These
contracts are linked to the numbers of races that are staged in a
particular period. Arena enters into long-term contracts for the
provision of racing content and has entered into an early agreement
for the period from 2012 to 2016, thereby securing this income for
the medium term. Arena has historically been able to secure over
350 fixtures a year and has a reasonable expectation of continuing
at this level.
Development and strategic risk
Arena has a strategy for the creation of value through
maximising the potential utilisation of real estate and land
assets. Central to this strategy are a number of planned and active
development projects. The new Marriott hotel and leisure facility
at Lingfield Park is now complete and no other on-going major
projects are currently in their construction phase.
The future major developments are:
-- A new hotel extension and casino (subject to securing a
licence) at Wolverhampton Racecourse;
-- A new hotel and residential development at Doncaster
Racecourse;
-- Planning application for a residential development and a
redevelopment of Folkestone Racecourse; and
-- Improved racecourse facilities, including a new entrance
building, at Royal Windsor Racecourse.
Arena manages a number of strategic risks related to the
delivery of value through exploiting its multiple sources of value
creation:
-- The current credit markets have reduced the availability and
increased the cost of additional debt funding which has a potential
impact on the Group's ability to source acceptable funding for
future development projects; and
-- Potential failure to achieve acceptable planning consents for
the surplus land holdings, of which the most significant is that at
Folkestone Racecourse.
In order to mitigate the risks in its development programme,
Arena has or will:
-- Undertake detailed feasibility studies in respect of the new
developments using highly qualified and experienced consultants to
assess the business potential in each location;
-- Chose to work with internationally recognised hotel brands
with significant experience and market presence based upon
established management contract and franchise models;
-- Employ suitably experienced and qualified project managers
for each construction project who are dedicated to delivering the
development from planning through to completion;
-- Enter into fixed price contracts with suitably experienced
and established building contractors;
-- Maintain a close relationship with our current lender, as
well as building and maintaining relationships with other potential
lenders. In addition, management and the Board continue to consider
other alternative sources of investment capital; and
-- Detailed planning strategies have been developed in
conjunction with a suitably qualified property consultant. Regular
meetings are held with local council executives and planning
departments and representations have been made through the Local
Development Framework process.
Health and safety risk
Arena must ensure it satisfies all health and safety
standards.
Arena takes the following actions to ensure the health and
safety of its employees and customers:
-- The Group has employed suitably qualified and experienced
health and safety managers to ensure that the Group's industry
leading health and safety policies are communicated and complied
with;
-- Each racecourse employs an on-site food safety specialist
whose training is overseen by the Group's Health & Safety
Manager. These on-site employees are, in turn, responsible for
ensuring all racecourse catering staff receive food hygiene
training; and
-- From a racing perspective, the Group's Health and Safety
Manager is responsible for communicating controls and procedures
across the Group. She is a member of the Racecourse Association's
Safety Advisory Group and ensures that industry best practice is
implemented across all seven racecourses.
Responsibility statement of the Directors in respect of the
annual financial report
The Directors confirm to the best of their knowledge:
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit and loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- The Directors' Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
By order of the Board
Robert Mercer FCMA
Company Secretary
7 March 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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