TIDMPRA
RNS Number : 8514H
Praesepe PLC
03 June 2011
3 June 2010
Praesepe plc
("Praesepe" or the "Company" or the "Group", AIM:PRA)
Preliminary Results for the 52 weeks ended 26 December 2010
and recommended offer from Marwyn Management Partners plc
Praesepe is a UK based company quoted on AIM. Its strategy is to
build a diversified gaming group by pursuing acquisition and
consolidation opportunities in the Low Stake High Volume ("LSHV")
betting and gaming sector in the UK and Europe. Potential areas of
interest to the company include, but are not limited to, Adult
Gaming Centres ("AGCs"), Family Entertainment Centres (coastal
family arcades, or "FECs"), bingo, sports betting, on-line gaming
and provincial casino gaming.
The statement below reports Praesepe's trading results for the
52 weeks ended 26 December 2010, which include a full year of
trading and central costs for the 49 Cashino AGC and FEC sites
acquired during 2008 and 2009 and the three Greenfield AGCs opened
during the same period, together with the post acquisition trading
results of 26 AGCs, six bingo clubs and the online bingo site
acquired through Beacon Entertainments Limited in April 2010 and
the eight High Street AGCs acquired during the period from the
Noble Organisation.
The Company also announces that an independent committee of the
Board has voted to recommend to shareholders a conditional offer
(the "Offer") from Marwyn Management Partners plc ("MMP") to
acquire the entire issued share capital of the Company on a share
for share basis. More detailed information on the Offer is provided
in a separate statement issued by MMP.
Reported Financial Highlights
-- Revenue GBP38.1 million (FY09 GBP11.9 million)
-- Gross profit GBP19.6 million (FY09 GBP6.3 million)
-- EBITDA* of operating businesses GBP7.1 million (FY09 GBP2.2
million)
-- Group EBITDA* of GBP5.8 million (FY09 GBP1.1 million)
-- Impairment losses in light of the MMP offer of GBP8.1
million
-- Exceptional non-recurring costs of GBP3.0 million (FY09 costs
of GBP0.6 million)
-- Group loss before net finance charges and taxation of GBP8.4
million (FY09 loss of GBP0.8 million)
-- Group profit* GBP0.4 million (FY09 loss of GBP0.8
million)
-- Loss per share of 3.3p (FY09 loss of 0.7p)
* Stated before impairment losses, exceptional costs and share
based payment charges
Operating Highlights
-- Transformational acquisition of Beacon Entertainments
Limited, compromising six premier bingo clubs, 26 AGCs and an
online bingo site. Delivered the targeted GBP2.0million of full
year cost savings on a run rate basis on the enlarged Group's cost
base ahead of schedule.
-- Two further successful acquisitions of operating businesses,
compromising 8 High Street AGC venues, from the Noble Organisation
in September 2010, followed by a further acquisition of 14 AGC
venues from the Noble Organisation after the balance sheet date in
January 2011.
-- Raised GBP6.6 million in cash (before expenses) from two
equity placements, acquired net cash of GBP5.3 million on purchase
of business and re-invested GBP1.1 million to fund capital
expenditure program for property refurbishment and estate
development.
-- Since period end awarded management contract to run 75 UK
High Street AGCs trading under the Agora name for 12 months, with
the option to acquire 100% of that business at a date to be agreed
during the period between 25 May 2011 and 24 February 2012.
-- Praesepe now operates and manages 171 High Street gaming
venues, 4 Family Entertainment Centres, 6 Bingo Clubs and an
on-line bingo web site. Included in this estate are the iconic
Crystal Rooms AGC in Leicester Square and the Beacon Bingo Club in
Cricklewood, the largest bingo club in the UK.
Current trading and Outlook
Current trading in our core and acquired businesses remains
relatively resilient and we are pleased with the way that all our
businesses have started in 2011. We expect to see the long overdue
deregulation of B3 gaming machines in 2011 and regard that as very
exciting for our business. As previously stated, we would expect
any increase in stakes to have a positive impact on our business
and the potential for revenue growth.
We are firmly committed to capitalising on opportunities that we
see arising from the regulatory environment. A good example of this
is the new Bingo Express(TM) product on which we have been
collaborating with a number of other operators and which launched
in a number of our High Street venues, providing pooled bingo games
across the UK. We are very excited about the opportunity to provide
pari mutuel bingo gaming across our estate.
With our experienced management team we remain committed to our
strategy to consolidate the LSHV market and to build a diversified
gaming business in the UK and Europe. We are confident in our
ability to both integrate "bolt on" acquisitions to further grow
the business over the coming months, and also to pursue
increasingly large transformational deals. We continue to assess a
number of potential acquisition opportunities and remain confident
that significant opportunities in all gaming sectors will arise in
2011.
Commenting on the results Nick Harding, CEO of Praesepe,
said:
"2010 saw the business start to benefit from increased scale and
operating leverage as we continued to add new venues and gaming
formats. In 2011 we expect to bed these benefits down and
accelerate our growth.
The UK continues to be a challenging market but despite this we
are pleased that our like for like revenues were relatively
resilient across the Group with our core Cashino business
delivering a 2.9% year on year increase in gross revenues (before
the impact of VAT) and a 1.5% year on year increase after taking
into account VAT (which rose from 15% to 17.5% at the start of
January 2010). At the same time we managed our costs tightly and
saw EBITDA continue to grow, further helped by the benefit of
acquisitions since December 2009.
The acquisition of Beacon Entertainments Limited has been
transformational for us and we are delighted that we achieved the
target of GBP2.0 million of full year cost savings ahead of
schedule. We have now also successfully integrated 22 High Street
AGCs acquired from the Noble Organisation (8 acquired during 2010
and 14 acquired after the 2010 period end) and have since the
period end been awarded an initial 12 month management contract for
75 AGCs trading under the Agora name. We look forward in 2011 to
the deregulation of Category B3 machines as well as the launch of
the new Bingo Express(TM) product which offers us exciting
opportunities to expand our bingo offering across our estate.
We remain confident in our ability to consolidate the LSHV
sector, and are encouraged by the number of opportunities we see in
the market. However, the ongoing uncertainty in financial markets,
coupled with the overall economic outlook, has made it more
difficult to raise finance with attractive terms to continue our
acquisition strategy. The Offer from MMP represents a potential
solution to this obstacle, and the management team believe it would
allow us to take advantage of the significant opportunities for
value creation we see ahead of us."
ENDS
Contacts
Praesepe plc
Nick Harding, Chief Executive Officer Tel: +44 (0)7970
148000
Matthew Proctor, Chief Financial Officer Tel: +44 (0)7985
116578
Brunswick
Chris Blundell Tel: +44 (0)20 7404 5959
Claire Boszko
Liberum Capital (NOMAD and Broker)
Chris Bowman Tel: +44 (0)203 100 2222
Richard Bootle
Operating Review
Cashino
As noted above, the UK continues to be a challenging market but
despite this we are pleased that our like for like revenues were
relatively resilient across the Group with our core Cashino
business delivering a 3% year on year increase in gross revenues
(before the impact of VAT) and a 2% year on year increase after
taking into account VAT (which rose from 15% to 17.5% at the start
of 2010). At the same time we managed our costs tightly and saw
EBITDA continue to grow, further helped by the benefit of
acquisitions since December 2009.
Acquisitions
2010 marked Praesepe's third year of operation as a consolidator
in the UK and European LSHV gaming market. Praesepe maintains a
highly disciplined assessment and selection process when
considering acquisitions.
In April 2010 we successfully completed the acquisition of
Beacon Entertainments Limited, which operates 26 AGC venues under
the 'Showboat' brand and 6 bingo clubs under the 'Beacon Bingo'
brand. This was a transformational deal for Praesepe, substantially
increasing the Group's AGC footprint and creating a step change in
revenues and EBITDA. This deal delivered further leverage of the
Group's head office and support functions, providing the
opportunity to realise GBP2.0 million of full year cost savings
from the enlarged Group's cost base.
In September 2010 we acquired 8 AGC venues from the Noble
Organisation and in January 2011, we completed the acquisition of a
further 14 venues from the Noble Organisation. This was the Group's
seventh acquisition in less than three years and brings the number
of venues operated to 106 and the total machine estate to over
4,000 gaming machines.
In addition to this rapid growth we are pleased to note that our
online Bingo business is growing well from a standing start and has
benefitted from being linked to our existing Cashino Gaming
website.
Agora Management Contract
The delivery of our consolidation strategy continued in 2011
with the award, as announced on 1 March 2011, of a management
contract for 75 operating AGCs, largely trading under the 'Agora'
brand name, for an initial period of 12 months. In addition, the
Group has entered into an exclusive agreement under which it is the
intention to agree an option for Praesepe to acquire 100% of that
business at a date to be agreed during the period between 25 May
2011 and 24 February 2012.
Gaming Machine Stake & Prize Review
One major area of disappointment in 2010 was the continued delay
to the proposed review of B3 gaming machine stakes and prizes. The
Conservative Party in opposition confirmed they were supportive of
the changes required to the format of B3 machines and it is
disappointing that this has not been forthcoming. We understand
that this delay has been caused by administrative process but that
the changes will be implemented later in 2011. The delay meant that
we continue to hold back a significant amount of capital
expenditure allocated to the injection of new equipment into the
business. This had a consequential negative effect on revenues and
profits for the second half of 2010.
Management team
Whilst 2010 was challenging, I was very pleased with the way the
management team integrated the Beacon business into the Group,
delivering comfortably the targeted GBP2.0 million of cost savings
on a run rate basis and we are now in a very strong position to
take on more businesses and leverage our base in Milton Keynes. Our
ability to win the recent Agora management contract to run a
further 75 High Street AGC venues is an example of that
leverage.
Board
We continue to build our highly experienced management team and
are delighted that Simon Thomas agreed to join us in July 2010 as a
Non Executive Board member. Simon has previously held senior
positions in Beacon Entertainments and Thomas Holdings Group and is
a highly experienced operator in the LSHV gaming sector across the
UK and Europe.
Finally, I would like to take this opportunity to pay tribute to
the hard work, enthusiasm and good humour of all our staff who
undoubtedly are our most valuable asset and are, without doubt, the
best team in the business.
FINANCIAL REVIEW
Group revenue and EBITDA*
Revenue arises from the AGC trading activities of the Cashino
business acquired in 2008, the AGC and FEC businesses acquired in
2009, and the post acquisition trading of the AGC and bingo
businesses acquired during the course of 2010.
The Group generated revenues of GBP38.1 million during 2010
compared with revenues of GBP11.9 million in 2009. This revenue
growth has largely been driven by the Group's bingo club and AGC
acquisitions during the year. Whilst trading during the 52 weeks
ended 26 December 2010 remained challenging, particularly as a
result of the difficult economic conditions prevalent throughout
2010 and the increase in the rate of VAT to 17.5% at the start of
2010, both of which adversely impacted consumer confidence and
spending habits, I am pleased with the relative resilience that our
business has shown during 2010, with our core Cashino business
delivering a 2.9% like for like year on year increase in gross
revenues (before the impact of VAT).
We are also pleased to report that on a normalised basis (stated
before impairment losses, exceptional items and share based payment
charges) the Group delivered a profit of GBP425,000 for the period
compared with a loss of GBP755,000 in 2009.
Overall, the Group delivered EBITDA*, after central costs, of
GBP5.8 million compared to GBP1.1 million in 2009 reflecting the
benefit of the business acquisitions since December 2009,
particularly the Beacon acquisition.
However, given the difficult economic climate and in light of
the offer by Marwyn Management Partners ("MMP") to acquire the
entire issued share capital of the Company, the annual goodwill
impairment review by the Directors has resulted in the carrying
value of the Cashino and United Leisure goodwill being impaired by
GBP4.9 million and GBP3.2 million respectively. These impairment
losses adversely impacted the results by GBP8.1 million in
aggregate and the loss per share by 2.5 pence.
Exceptional costs
Exceptional costs were GBP3.0 million compared with GBP0.6
million in the prior year period. This increase in exceptional
costs primarily arises due to a change in International Financial
Reporting standards (IFRS 3 revised) with effect from the start of
2010, which now requires costs relating to acquisitions,
irrespective of whether the acquisition is successfully completed
or not, to be charged to exceptional items when incurred, unless
they are directly attributable to the issue of equity or debt. In
previous periods, those costs relating to acquisitions which
completed could be capitalised on the balance sheet as either
acquisition costs (in goodwill), as debt issue costs or as equity
issue costs and did not need to be taken as exceptional items.
Furthermore, costs on potential acquisitions which were considered
highly likely to be completed could be carried forward on the
balance sheet until the acquisition was either completed or was no
longer highly probable.
Result for the Period
The reported loss for the 52 weeks ended 26 December 2010 was
GBP10.8 million compared to a loss of GBP1.4 million in 2009. This
resulted in a basic and fully diluted loss per share for the period
of 3.3 pence (2009: loss of 0.7 pence).
However, I am pleased to report that on a normalised basis (i.e.
excluding impairment losses, exceptional items and share-based
payment charges) the Group generated a profit for the period of
GBP0.4 million (2009: loss of GBP0.8 million), resulting in a
normalised profit per share* of 0.1 pence in 2010 (2009: loss of
0.4 pence).
* Stated before impairment losses, exceptional costs and share
based payment charges
Bank Debt
During the period, as a part of the acquisition of Beacon
Entertainments Limited, the Group repaid a GBP3.8 million secured
bank loan and took on GBP40.0 million in secured bank loans with
different banks. As a result, the Group's total bank debt as at 26
December 2010 amounted to GBP42.0 million. In addition, the Group
has previously issued GBP6.5 million of convertible loan notes
which accrue rolled up interest at a rate of 11% p.a., and has a
GBP0.3 million loan from the pension fund of the previous owner of
the Crystal Rooms.
In line with usual agreements in respect of bank debt
facilities, the bank loan agreements require the Group to comply
with certain financial and non-financial covenants.
On 1 June 2011 the Company announced that it had agreed with its
lenders to extend the terms of the repayment of GBP2.35 million of
the bank debt, originally due on 20 April 2011, to 17 June 2011 in
conjunction with the MMP offer (see note 26).
Acquisitions
On 20 April 2010, the Group acquired Beacon Entertainments
Limited and its subsidiaries which operate 6 premier bingo clubs,
26 AGCs and an online bingo site, for a purchase consideration
(excluding deal costs) of GBP5.0 million payable by a combination
of 63,333,334 ordinary shares issued to the vendors at a price of
7.5 pence per share and GBP272,000 in cash. As a part of the
acquisition, the Group assumed GBP40.0 million in bank debt.
Subject to the fulfilment of certain performance conditions, the
vendor may also receive up to 28,500,000 additional ordinary
shares.
The Group fair valued the net liabilities and intangible assets
acquired at GBP31.6 million and fair valued all elements of the
consideration (including the potential additional consideration
shares and vendor deal costs) at GBP6.2 million, resulting in
goodwill arising on the acquisition of GBP37.8 million.
On 20 September 2010 the Group acquired 8 operating AGCs for a
purchase consideration of GBP1.0 million (excluding deal costs),
from various members of the Noble Organisation ("Noble"). The
consideration was funded through the issue of 13,333,333 new
ordinary shares in Praesepe plc at a price of 7.5 pence per share
to Falcombe Holdings Limited ("Falcombe"), a company connected to
the rest of Noble by common ownership.
The Group fair valued the net assets and intangible assets
acquired at GBP0.7 million and fair valued all elements of the
consideration at GBP1.1 million, resulting in goodwill arising on
the acquisition of GBP0.5 million.
Subsequent to the end of the financial period, the Group
acquired a further 14 operating AGCs from Noble for a total
consideration of GBP2.3 million (excluding deal costs). The
consideration was funded through the issue of 28,535,981 new
ordinary shares in Praesepe plc at a price of 8.06 pence per share
to Falcombe.
Equity
On 1 March 2010, the Group's shareholders approved a share
reorganisation whereby each ordinary share of 10 pence was
subdivided into one new ordinary share of 1 pence and one deferred
share of 9 pence. The deferred shares have no rights to voting,
dividends or capital distributions. The new ordinary shares have
the same rights (including voting and dividend rights) as the
previously issued ordinary shares.
In addition, at the Company's general meeting on 1 March 2010,
the shareholders also approved the necessary resolutions to grant
conversion rights to the loan notes, which are now convertible to
ordinary shares at a conversion price of 9 pence per share.
On 30 March 2010, the Group completed a placing of 80,000,000
ordinary shares of 1 pence each at a placing price of 7.5 pence per
share to raise GBP6.0 million before expenses. The placing provided
additional working capital for the Group to repay the Group's
GBP3.8 million bank loan and pay the deal fees in respect of the
acquisition of Beacon Entertainments Limited and its subsidiaries,
which completed on 20 April 2010 and, as described above, was
funded in part by the issue of ordinary shares to the vendors.
In addition, as noted in "Acquisitions" above, to the date of
this report the Group has made two further issues of Praesepe
shares to fund AGC acquisitions being; (i) 13,333,333 ordinary
shares at a price of 7.5 pence per share on 20 September 2010; and
(ii) subsequent to the end of the financial period, 28,535,981
ordinary shares a price of 8.06 pence per share on 31 January
2011.
Consequently, the issued ordinary share capital of Praesepe at
the date of these financial statements is 405.3 million ordinary
shares of 1 pence each.
Dividends
No interim or final dividend has been paid or proposed (2009:
GBPnil). The Directors continue to believe that the main focus of
the Company should be on delivering capital growth for
shareholders, in line with its stated strategy. However, the
dividend policy of the Company continues to be regularly
reviewed.
Financial Risk
The Group's activities necessarily expose it to a variety of
financial risks. The most important components of financial risk
impacting the Group are interest rate risk and liquidity risk.
These are discussed in turn below. The Group is not subject to
significant credit risk due to the nature of the Group's business,
which is cash based. The Group has no exposure to either foreign
currency risk, as currently all its activities are based in the
UK.
Interest rate risk
The Group's trading income and operating cash flows are
independent of any changes or movements in interest rates. The
Group's exposure to interest rate risk is limited as it arises
primarily from its bank borrowings, on which the interest charged
is linked closely to LIBOR and is substantially hedged though a
fixed interest rate swap which was acquired as a part of the Beacon
acquisition and then renegotiated so that the profile of the swap
matched that of the bank debt. The Group regularly reviews its
interest rate exposure on its variable rate borrowings in order to
identify its potential exposure to changes in UK interest
rates.
Surplus cash balances are placed so as to maximise interest
earned whilst maintaining the liquidity requirements of the
business. The Directors regularly review the placing of cash
balances. Any surplus cash balances during the year were placed on
short-term interest bearing accounts at standard bank floating
interest rates.
Liquidity risk
Liquidity risk is the risk that cash may not be available to pay
obligations when they fall due. Cash forecasts identifying the
liquidity requirements of the Group are produced and reviewed
regularly to ensure the Group has sufficient financial
resources.
Cash Flow & Re-investment
The Group's operating activities delivered a cash inflow from
operations of GBP0.1 million in the period compared with a cash
inflow from operating activities of GBP0.1 million in the prior
period. The Group raised GBP6.6 million in cash (net of expenses)
from two equity placings during the period and acquired net cash of
GBP5.3 million on purchase of businesses. The Group re-invested
GBP1.1 million to fund its capital expenditure programme, primarily
on property refurbishment and the replacement/upgrading of a number
of gaming machines, repaid GBP3.8 million of bank debt and paid
GBP1.7 million in interest during the period.
Prior year change in the period end accounts reporting
period
As noted in the Group's prior year accounts, during 2009 the
Group changed its period end accounts reporting period from the
basis of 12 monthly accounting periods to that of thirteen, four
weekly accounting periods ending on the last Sunday in December
each year. This accounts reporting approach is in line with many
other businesses operating in the retail and entertainment sector.
As a result, the year end accounting period for 2009 ended on 27
December 2009. As 2009 represented the first year of this change in
accounts reporting period, the reported results for 2009 covered
the period from 1 January 2009 to 27 December 2009. The 2010
financial accounts are for the 52 week period ended 26 December
2010.
Going Concern
The Directors have prepared these financial statements on a
going concern basis consistent with their view, formed after
reviewing the Group's trading and cash flow forecasts, after making
appropriate enquiries, and after taking into account the offer from
MMP, that the Group has adequate resources to continue in operation
for at least the next twelve months. This is discussed further in
note 1.a to the financial information below.
FINANCIAL INFORMATION
Annual report and accounts
Consolidated income statement
For the 52 weeks ended 26 December 2010
52 weeks Period
ended ended
26 December 27 December
2010 2009
Notes GBP'000 GBP'000
------------------------------------------ ------ ------------ ------------
Revenue 1,2 38,091 11,883
Cost of sales (18,488) (5,551)
------------------------------------------ ------ ------------ ------------
Gross profit 19,603 6,332
Administrative expenses (16,818) (6,612)
Impairment losses 9 (8,124) -
Exceptional expenses 3 (3,039) (566)
------------------------------------------ ------ ------------ ------------
Operating loss 2,4 (8,378) (846)
Finance revenue 6 3 3
Finance costs 6 (2,641) (547)
------------------------------------------ ------ ------------ ------------
Loss before tax (11,016) (1,390)
Taxation credit/(charge) 7 208 (47)
Loss for the period attributable to
equity holders (10,808) (1,437)
------------------------------------------ ------ ------------ ------------
Loss per share
Basic and diluted loss per share 8 (3.3)p (0.7)p
------------------------------------------ ------ ------------ ------------
All the Group's activities derive from continuing
operations.
Consolidated statement of comprehensive income
For the 52 weeks ended 26 December 2010
52 weeks Period
ended ended
26 December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Loss for the period attributable
to equity holders (10,808) (1,437)
Other comprehensive income
Cash flow hedge (12) -
Tax on cash flow hedge 4 -
---------------------------------------- ------------ ------------
Other comprehensive income for the
period, net of tax (8) -
Total comprehensive income for the
period attributable to equity holders (10,816) (1,437)
---------------------------------------- ------------ ------------
Consolidated statement of financial position
As at 26 December 2010
26 December 27 December
2010 2009
Notes GBP'000 GBP'000
------------------------------------------ ------ ------------ ------------
Non-current assets
Goodwill 9 61,210 31,035
Other intangible assets 10 1,648 887
Premiums on operating leases 11 563 381
Property, plant and equipment 12 15,606 8,905
------------------------------------------ ------ ------------ ------------
79,027 41,208
------------------------------------------ ------ ------------ ------------
Current assets
Inventories 13 427 89
Prepayments and accrued income 14 2,395 1,608
Cash and cash equivalents 15 7,542 3,588
------------------------------------------ ------ ------------ ------------
10,364 5,285
------------------------------------------ ------ ------------ ------------
Total assets 89,391 46,493
------------------------------------------ ------ ------------ ------------
Current liabilities
Trade and other payables 16 (8,188) (2,986)
Corporation tax liabilities (22) (306)
Other taxation liabilities (1,271) (583)
Loans, borrowings and derivative
financial liabilities 17 (5,718) (4,545)
------------------------------------------ ------ ------------ ------------
(15,199) (8,420)
------------------------------------------ ------ ------------ ------------
Non-current liabilities
Loans, borrowings and derivative
financial liabilities 17 (43,544) (7,982)
Deferred tax liabilities 18 (301) (705)
------------------------------------------ ------ ------------ ------------
(43,845) (8,687)
------------------------------------------ ------ ------------ ------------
Total liabilities (59,044) (17,107)
------------------------------------------ ------ ------------ ------------
Total net assets 30,347 29,386
------------------------------------------ ------ ------------ ------------
Equity
Share capital 20 23,578 22,011
Share premium 18,724 12,984
Merger reserve 4,116 -
Other reserves 21 635 168
Retained losses (16,706) (5,777)
------------------------------------------ ------ ------------ ------------
Total equity attributable to equity
holders of the parent 30,347 29,386
------------------------------------------ ------ ------------ ------------
Company registered number - 05745526
Consolidated statement of changes in equity
For the 52 weeks ended 26 December 2010
Share Share Merger Other Retained
capital Premium Reserve Reserves Losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------- --------- ---------
At 31 December
2008 16,911 13,297 - 52 (4,340) 25,920
--------------- -------- -------- -------- --------- --------- ---------
Total
comprehensive
loss for the
period - - - - (1,437) (1,437)
--------------- -------- -------- -------- --------- --------- ---------
Transactions
with owners:
Share Issue on
2 March 2009
Cost relating
to shares
issued
Share-based 5,100 - - - - 5,100
payments - (313) - - - (313)
charge - - - 116 - 116
--------------- -------- -------- -------- --------- --------- ---------
Transactions
with owners 5,100 (313) - 116 - 4,903
--------------- -------- -------- -------- --------- --------- ---------
At 27 December
2009 22,011 12,984 - 168 (5,777) 29,386
--------------- -------- -------- -------- --------- --------- ---------
Loss for the
period - - - - (10,808) (10,808)
Other
comprehensive
losses:
Cash flow
hedge - - - (12) - (12)
Tax on cash
flow hedge - - - 4 - 4
--------------- -------- -------- -------- --------- --------- ---------
Total
comprehensive
loss for the
period - - - (8) (10,808) (10,816)
--------------- -------- -------- -------- --------- --------- ---------
Transactions
with owners:
Share issue on
30 March
2010 800 5,200 - - - 6,000
Share issue on
20 April
2010 634 - 4,116 - - 4,750
Share issue on
20 September
2010 133 867 - - - 1,000
Cost relating
to shares
issued - (327) - - (121) (448)
Share-based
payments
charge - - - 70 - 70
Convertible
loan note
equity
component - - - 385 - 385
Tax on equity
component on
convertible
loan note - - - (111) - (111)
Ordinary
shares to be
issued - - - 131 - 131
Transactions
with owners 1,567 5,740 4,116 475 (121) 11,777
At 26 December
2010 23,578 18,724 4,116 635 (16,706) 30,347
--------------- -------- -------- -------- --------- --------- ---------
Details of the other reserves are provided in note
21.Consolidated statement of cash flows
For the 52 weeks ended 26 December 2010
52 weeks ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------------------- --------------- -------------
Operating activities
Operating loss (8,378) (846)
Adjustments to reconcile operating loss for
the period to net cash flow from operating
activities:
Depreciation and amortisation 2,962 1,231
Impairment losses 8,124 -
Loss on disposal of property, plant and
equipment 18 1
Increase in inventories (62) (12)
Decrease in other receivables, prepayments
and accrued income 1,485 101
Decrease in trade and other payables (3,853) (39)
Taxation paid (305) (480)
Share-based payment charges 70 116
---------------------------------------------- --------------- -------------
Net cash flows from operating activities 61 72
---------------------------------------------- --------------- -------------
Investing activities
Purchase of businesses net of cash acquired
(note 9) 5,336 (8,631)
Purchase of plant, property and equipment (1,052) (695)
Purchase premiums on operating leases - (14)
Purchase of intangible assets (54) (22)
Interest received 3 3
---------------------------------------------- --------------- -------------
Net cash flows from investing activities 4,233 (9,359)
---------------------------------------------- --------------- -------------
Financing activities
Fees associated with loan facilities (note
17) (1,403) -
Repayments of borrowings (3,750) (352)
Repayments of finance lease liabilities - (53)
Proceeds from share issues 6,551 4,787
Proceeds from issue of unsecured convertible
loan notes - 6,500
Interest paid (1,738) (341)
---------------------------------------------- --------------- -------------
Net cash flows from financing activities (340) 10,541
---------------------------------------------- --------------- -------------
Net increase in cash and cash equivalents 3,954 1,254
---------------------------------------------- --------------- -------------
Cash and cash equivalents at beginning of
period 3,588 2,334
---------------------------------------------- --------------- -------------
Cash and cash equivalents at end of period 7,542 3,588
---------------------------------------------- --------------- -------------
Notes to the Consolidated Financial Statements
For the 52 weeks ended 26 December 2010
General Information
The financial information set out in this preliminary
announcement does not constitute the Company's statutory financial
statements for the 52 weeks ended 26 December 2010 within the
meaning of Section 435 of the Companies Act 2006, but is derived
from the 2010 consolidated financial statements.
The financial information contained in this report and in the
Company's 2010 financial statements has been audited. The 2010
financial statements will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
The audit report on the financial statements was not qualified
but it has been modified to include an emphasis of matter
disclosure in respect of going concern. The audit report on the
financial statements did not contain a statement under Section 498
(2) or Section 498 (3) of the Companies Act 2006. The consolidated
financial statements for the 52 weeks ended 26 December 2010
comprise the consolidated financial information of Praesepe plc
("the Company") and its subsidiaries.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS).
The accounting policies and supporting notes to the financial
statements are included in the audited financial statements of the
Company.
The comparative financial information for the period ended 27
December 2009 is derived from the financial statements for the
period ended 27 December 2009. The financial statements for the
period ended 27 December 2009 have been delivered to the Registrar
of Companies. The auditors have reported on the 2009 financial
statements and their report was unqualified and unmodified.
1. Accounting Policies
The financial information comprises the audited consolidated
financial statements of Praesepe plc (the "Company") and its
subsidiaries. Praesepe plc is an AIM-listed company incorporated
and domiciled in England. The address of its registered office and
principal place of business is Seebeck House, 1A Seebeck Place,
Knowlhill, Milton Keynes, MK5 8FR.
During 2009, the Company changed its reporting periods from
monthly to 13 accounting periods of four weeks each, with the last
reporting period of each financial year ending on the last Sunday
in December. Accordingly, these financial statements cover the
period from 28 December 2009 to 26 December 2010, however as 2009
was the first year of this change in accounts reporting period, the
comparative results for 2009 cover the period 1 January 2009 to 27
December 2009.
a) Basis of preparation
Group
The consolidated financial statements for the 52 weeks ended 26
December 2010 have been prepared on a going concern basis, in
accordance with IFRS as adopted by the European Union (IFRS), and
those parts of the Companies Act 2006 that remain applicable to
companies reporting under IFRS. The financial statements have been
prepared on the historical cost basis, except for the valuation of
certain financial instruments at fair value. The preparation of
financial statements in conformity with IFRS requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results seldom
equal these estimates. The areas involving a higher degree of
judgement or complexity, where assumptions and estimates are
significant to the consolidated financial statements, are set out
below in note 1.u. The accounting policies have been consistently
applied to both of the periods presented in these financial
statements.
Going Concern
The Directors have adopted the going concern basis in the
preparation of the financial statements on the basis that MMP will
invest GBP3.0 million into the Company following the offer, as
detailed in note 26, for Praesepe being declared unconditional on
or before 17 June 2011. This will provide Praesepe with the capital
required to meet its bank debt repayment schedule, which was
revised as detailed in note 26, and funds for additional working
capital.
Based on the terms of the offer and the level of irrevocable
acceptances already received by MMP, the directors are of the
opinion that the MMP offer will be declared unconditional before 17
June 2011.
Accordingly, the financial statements are presented on the going
concern basis and do not include any adjustments that would result
if the Group was unable to continue as a going concern.
a) Basis of preparation (continued)
i) Subsidiaries
The consolidated financial statements incorporate the financial
statements of the companies controlled by the Company (its
subsidiaries) made up to the last Sunday in December each year.
Control is achieved where the Company has the power to govern the
financial and operating policies of an investee entity so as to
obtain benefits from its activities. Results of subsidiary
undertakings acquired during the period are consolidated from the
date on which control passes. The trading results of companies
acquired during the period are accounted for under the purchase
method of accounting. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
ii) Business combinations
At the date of acquisition, the identifiable assets and
liabilities and contingent liabilities of a subsidiary are measured
at their fair values. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired is
recognised as goodwill. Acquisition related costs are expensed as
incurred.
At the reporting date, where management's assessment and
accounting of the business combination is in the process of being
finalised, the carrying amount of the assets, liabilities and
goodwill are stated as provisional. The provisional amounts will be
finalised within 12 months from the date of acquisition, with
appropriate adjustments made to the assets, liabilities and
goodwill as prior year adjustments where necessary.
The fair value of contingent consideration is determined through
management's best estimate of the weighted probabilities attached
to the potential outcomes, discounted to their net present
value.
In circumstances where the acquisition consideration is settled
through the issue of shares merger relief is applied in the
acquiring company, in accordance with the Companies Act 2006. The
investment is carried at fair value in the acquiring company's
accounts and, where appropriate, a merger reserve is created in
respect of the difference between the fair value of the
consideration shares and their nominal value in both the acquiring
company and on consolidation.
b) Revenue recognition
Revenue primarily represents receipts from gaming machines,
excluding value added tax, and from bingo operations. Revenue is
generated wholly within the United Kingdom. Machine revenue
represents machine cash receipts, net of machine payouts. Bingo
revenue is stated after the deduction of cash prizes. Interest
income is accrued on a time basis, by reference to the principal
outstanding and at the interest rate applicable.
c) Exceptional items
Items that are material in size and non-recurring in nature are
presented as operating exceptional items in the consolidated
statement of comprehensive income within operating profit. The
Directors are of the opinion that the separate recording of the
operating exceptional items provides helpful information about the
Group's underlying business performance. Examples of events which
may give rise to the classification of items as exceptional include
redundancy costs arising from reorganisations and expenses that are
directly attributable to a potential business combination. As noted
below IFRS 3 (revised), applicable to the Group from 28 December
2009, now requires costs relating to acquisitions to be expensed in
the statement of comprehensive income when incurred. As stated
above these costs are presented in exceptional items. In previous
periods, those costs relating directly to acquisitions which
completed could be capitalised on the balance sheet as acquisition
costs (in goodwill).
d) Goodwill
Goodwill arising on the acquisition of subsidiary undertakings
and businesses, representing the excess of the fair value of the
consideration given over the fair value of the identifiable assets
and liabilities acquired, is capitalised as an intangible asset.
The carrying value of goodwill is tested for impairment at least
annually by reference to the relevant cash-generating unit (CGU)
and is carried at cost less accumulated impairment losses. Any
impairment is recognised immediately in the consolidated statement
of comprehensive income and is not subsequently reversed.
e) Other intangible assets Intangible assets purchased
separately are capitalised at cost and amortised on a straight line
basis over their useful economic lives. Intangible assets acquired
through a business combination are capitalised separately from
goodwill at their fair values on initial recognition. After initial
recognition assets acquired as part of a business combination are
carried at cost less accumulated amortisation and any impairment
losses. Methods of amortisation, residual value and useful lives
are reviewed and if necessary adjusted at each reporting date.
Intangible assets with indefinite useful lives are tested annually
for impairment either individually or at the CGU level.
All intangible assets with finite useful lives are amortised on
a straight line basis over their expected lives of 10 years.
f) Premiums on operating leases
Premiums on operating leases relating to business acquisitions
are stated at historical cost less accumulated amortisation.
Amortisation is charged on a straight line basis over the term of
the lease to which they relate. Lease terms range between 5 and 20
years.
g) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Cost
comprises the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as
intended.
Depreciation is provided on all property, plant and equipment,
on a straight line basis over its expected useful life as
follows:
-- Freehold properties 2% per annum
-- Short leasehold property over the term of the lease
-- Plant and equipment between 5% and 50% per annum
-- Fixtures and fittings between 25% and 33% per annum
The carrying values of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable and are written
down immediately to their recoverable amount. Useful lives and
residual values are reviewed annually and where adjustments are
required these are made prospectively.
An item of property, plant and equipment is de-recognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the de-recognition of the asset is included in the consolidated
statement of comprehensive income in the period of
de-recognition.
h) Impairment of financial assets
The Group assesses at each reporting date whether a financial
asset or group of financial assets is impaired. Any impairment is
charged to the consolidated statement of comprehensive income as
appropriate.
i) De-recognition of financial assets and liabilities
A financial asset or liability is generally de-recognised when
the contract that gives rise to it is settled, sold, cancelled or
expires.
j) Inventories
Inventory is stated at the lower of cost and net realisable
value. Cost is determined on a first-in, first-out basis.
k) Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of
financial position comprise cash at bank and in hand and short-term
deposits. For the purpose of the consolidated statement of cash
flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank
overdrafts.
l) Financial liabilities
Financial liabilities comprise trade and other payables and
interest bearing loans and borrowings. On initial recognition,
financial liabilities are measured at fair value net of transaction
costs. Transaction costs are charged to the consolidated statement
of comprehensive income under finance costs using the effective
interest rate.
m) Derivative financial instruments and hedging activity
As a result of the acquisition of Beacon Entertainments Limited
on 20 April 2010, the Group acquired an interest rate swap to
partially hedge the variable rate borrowings acquired. Derivatives
are recognised at fair value on the date a derivative contract is
entered into or acquired and are subsequently re-measured at their
fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designed as a hedging
instrument, and if so, the nature of the item being hedged.
The Group has designated its interest rate swap hedging variable
rate borrowings as a cash flow hedge. Accordingly the effective
portion of change in the fair value of the interest rate swap is
recognised in other comprehensive income. Amounts accumulated in
equity are reclassified to profit or loss in the periods in which
the hedged variable rate borrowings affect profit or loss. The gain
or loss relating to the ineffective portion is recognised when
incurred in the income statement within "finance revenue/cost".
n) Interest payable
Interest payable is charged as it accrues using the effective
interest rate basis.
o) Income taxes Current tax assets and liabilities are measured
at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or
substantively enacted by the period end date.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following
exception:
-- Deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward tax
credits or tax losses can be utilised.
o) Income taxes (continued)
Deferred income tax assets and liabilities are measured on an
undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax
rates and laws enacted or substantively enacted at the period end
date. The carrying amount of deferred income tax assets is reviewed
at each reporting date.
Income tax is charged or credited directly to equity if it
relates to items that are credited or charged to equity. Otherwise
income tax is recognised in the consolidated statement of
comprehensive income.
p) Pensions
The Group operates a defined contribution scheme for certain
employees. The costs of the pension funding borne by the Group are
charged to the consolidated statement of comprehensive income as an
expense as they fall due.
q) Leases
Leases where the lessor retains a significant portion of the
risks and benefits of ownership of the asset are classified as
operating leases and rentals payable are charged in the
consolidated statement of comprehensive income on a straight line
basis over the lease term. Benefits received and receivable as an
incentive to sign an operating lease are charged in the
consolidated statement of comprehensive income on a straight line
basis over the lease term.
Leases that transfer to the Group substantially all the risks
and benefits incidental to ownership of the leased item are
capitalised at the inception of the lease at the fair value of the
leased item or, if lower, at the present value of the minimum lease
payments.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease terms.
At 26 December 2010, the Group had finance lease liabilities of
GBP163,000 (2009: GBPnil). Given the immaterial nature of this
balance
the Board do not consider it material to provide separate
finance lease disclosure. The finance lease liability is included
in trade and other payables and the associated interest is included
in interest payable on loans and overdrafts.
r) Share-based payments and management incentive scheme
The Group reflects the economic cost of awarding shares and
share options to employees by recording an expense in the
consolidated statement of comprehensive income equal to the fair
value of the benefit awarded, fair value being determined by
reference to the Black-Scholes-Merton option pricing model. The
expense is recognised in the consolidated statement of
comprehensive income over the vesting period of the award.
The Group has three types of share-based payment plans in
place:
-- Management Participation Shares;
-- Marwyn Participation Option; and
-- Employee Incentive Schemes.
Management participation shares
As the success of Praesepe depends to a high degree on the
future performance of the management team, incentive arrangements
have been established which will only reward the participants if
shareholder value is created.
Certain key Executives subscribed for Management Participation
Shares in Praesepe (UK) Limited on 25 June 2008. If these shares
satisfy a number of stringent conditions, they can be sold to
Praesepe plc for an aggregate value equivalent to 13% of the
increase in "shareholder value". Shareholder value, for this
purpose, is broadly defined as the uplift in the equity value at a
future date over the equity value at the time of the first
acquisition.
Praesepe plc can purchase the Management Participation Shares
either for cash or for the issue of new ordinary shares at its
discretion. Participation Shares may only be sold on this basis if
both the Growth and Vesting conditions (as described below) have
been satisfied.
Growth condition
The Growth condition is that the compound annual growth of the
Company's share price must be at least 12.5% per annum. The growth
calculation takes into account the price at which equity issues
subsequent to the first acquisition are made, any dividends paid on
the ordinary shares and any capital returned to shareholders. The
Growth condition will be measured between three and five years
after the first acquisition and, if earlier, on a sale or change of
control of Praesepe.
Vesting condition
The Management Participation Shares are subject to a vesting
period of between three and five years from the date of the first
acquisition or on a sale or change of control of Praesepe if
earlier. If the Growth condition has not been met by the end of the
vesting period, these shares must be sold to Praesepe for a nominal
amount.
r) Share-based payments and management incentive scheme
(continued)
During the vesting period the participant may not sell any
Management Participation Shares unless he leaves employment. In
this case, the participant must sell all the Management
Participation Shares to Praesepe, or an individual nominated by
Praesepe, for a nominal amount unless he is a "good leaver".
A good leaver will be someone who leaves employment because of
injury, disability or death or who is designated by the
Remuneration Committee as a good leaver.
Marwyn participation option
On 25 June 2008 Praesepe entered into an option agreement with
Marwyn Management Partners LP (Marwyn) to align the interests of
Marwyn with those of the shareholders.
Subject to the provisions described below, the Marwyn
Participation Option may be exercised to subscribe for a number of
the ordinary shares at an exercise price equal to the 1 pence
nominal value per ordinary share.
The number of ordinary shares that may be subscribed for is such
number that will give Marwyn a gain (calculated after deducting the
exercise price) equivalent to 10% of the increase in shareholder
value, as described for the Management Participation Shares
above.
The Marwyn Participation Option may only be exercised on this
basis if both the Growth and Vesting conditions attached to the
Management Participation Shares (as described above) have been
satisfied. If the Growth condition has not been met by the end of
the vesting period, the Marwyn Participation Option will lapse for
no consideration.
Employee incentive schemes
(i) EMI Praesepe has established an approved and an unapproved
EMI Share Option Scheme which allow the grant of share options to
employees. Option grants are made at the discretion of the
Remuneration Committee.
The aggregate number of shares under option which may be granted
under the EMI Scheme is limited to a maximum 5% of the issued share
capital of Praesepe from time to time.
There are no performance conditions attached to these options,
however they can only be exercised between three and seven years
from the date of grant.
(ii) SAYE
The Company has introduced a save-as-you-earn staff incentive
scheme, the key terms of which are as follows:
-- The monthly saving amount for each member of staff is subject
to a minimum amount of GBP10 and a maximum amount of GBP250;
-- The minimum term of the scheme is 3 years and the maximum
term is 5 years; and
-- The exercise price is 80% of the market value of Praesepe plc
shares at the date of grant.
Further details of these share option schemes are set out in
note 24.
s) New standards, amendments and interpretations adopted in the
period
The Group has adopted the following new standards and
interpretations for the 52 weeks ended 26 December 2010:
-- IFRS 2 "Share-based Payment" (amendment) - the standard has
been amended to clarify the accounting for Group cash-settled
share-based payment transactions. This amendment also supersedes
IFRIC 8 and IFRIC 11. The early adoption of this amendment did not
have any impact on the financial position or performance of the
Group.
-- IFRS 3 "Business Combinations" (revised) and IAS 27
"Consolidated and Separate Financial Statements" (amended) -these
standards introduce significant changes in the accounting for
business combinations completed in the period. Changes affect the
valuation of non-controlling interest, the accounting for
transaction costs, the initial recognition and subsequent
measurement of contingent consideration and business combinations
achieved in stages. These changes have decreased the amount of
goodwill recognised, and reduced the reported results, in the
period by GBP1,904,000 and increased the loss per share by 0.6
pence, as set out in note 3.
-- IAS 27 (amended) requires that a change in the ownership
interest of a subsidiary (without loss of control) is accounted for
as a transaction with owners in their capacity as owners.
Therefore, such transactions will no longer give rise to goodwill,
nor will they give rise to gains or losses. Furthermore, the
amended standard changes the accounting for losses incurred by the
subsidiary as well as the loss of control of a subsidiary. The
revisions will affect future acquisitions or loss of control
of subsidiaries and transactions with non-controlling interests.
The revisions have been applied prospectively and had no impact
during the period.
-- IAS 39 "Financial Instruments: Recognition and Measurement -
Eligible Hedged Items" - the amendment addresses the designation of
a one-sided risk in a hedged item, and the designation of inflation
as a hedged risk in particular situations. The amendment had no
effect on the financial position or performance of the Group.
s) New standards, amendments and interpretations adopted in the
period (continued)
-- IFRIC 17 "Distribution of Non-cash Assets to Owners" - the
interpretation provides guidance on accounting for arrangements
whereby an entity distributes non-cash assets to shareholders
either as a distribution of reserves or as dividends. The
interpretation had no effect on the financial position or
performance of the Group.
-- IFRIC 18 "Transfers of Assets from Customers" - the
interpretation provides guidance on accounting for transfers of
assets received from customers. The interpretation had no effect on
the financial position or performance of the Group.
-- Improvements to IFRSs (issued April 2009) - The amendments to
standards was issued, primarily with a view to removing
inconsistencies and clarifying wording. The early adoption of the
amendments had no effect on the financial position or performance
of the Group.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
t) Future development
The new standards and amendments to existing standards that have
been published but are not yet mandatory for the Group to adopt are
presented below:
-- IAS 24 Related Party Disclosures (Revised) was issued in
November 2009. The Group is required to adopt this standard for the
52 weeks ended 25 December 2011. IAS 24R simplifies the
identification of related party relationships, particularly in
relation to significant influence and joint control. These changes
must be applied retrospectively with earlier application being
permitted, with disclosure of such fact.
-- IAS 32 Financial Instruments: Presentation - Classification
of Rights (Amendment) was issued in October 2009. The Group is
required to adopt this standard for the 52 weeks ended 25 December
2011. The definition of a financial liability
has been amended to classify rights issues (and certain options
or warrants) as equity instruments. This amendment is to be applied
retrospectively with early application permitted, with disclosure
of such fact.
-- IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments was issued in November 2009. The Group is required to
adopt this amendment for the 52 weeks ended 25 December 2011. IFRIC
19 clarifies that equity instruments issued to a creditor to
extinguish a financial liability qualify as consideration paid. The
equity instruments issued are measured at their fair value, unless
this cannot be reliably measured, in which case they are measured
at the fair value of the liability extinguished. Any gain or loss
is recognised immediately in profit or loss. If the amendment
results in a change in accounting policy, this is applied
retrospectively. Earlier application is permitted and must be
disclosed.
-- IFRS 9 Financial Instruments was re-issued in October 2010.
On EU adoption, the Group will be required to adopt this standard
for the 52 weeks ended 29 December 2013. The first phase of IFRS 9
addresses the classification and measurement of financial assets.
The key requirements of IFRS 9 are that at initial recognition, all
financial assets are measured at fair value with different
requirements for subsequent measurement for debt and equity
instruments.
-- Improvements to IFRS (May 2010), effective 1 July 2010/1
January 2011.
The Group has decided not to early adopt the above
standards.
There are no other IFRSs or IFRICs in issue but not yet
effective that are expected to have a significant impact for the
Group.
The Directors anticipate that the adoption of these new or
amended standards in future periods will not have a material impact
on the financial statements of the Group.
u) Critical accounting estimates and judgements Estimates and
judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Impairment of goodwill and other non-current assets
The Group determines whether goodwill is impaired on an annual
basis or more frequently if there are indicators of impairment.
Other non-current assets are tested for impairment if there are
indicators of impairment. Impairment testing requires an estimate
of future cash flows and the choice of a suitable discount rate.
These calculations require the use of estimates which are
inherently judgemental and susceptible to change because they
require the Group to make assumptions about future supply and
demand, economic and market conditions. Further details of the
assumptions and estimates adopted for impairment testing purposes
are disclosed in note 9.
Fair value of consideration shares and net assets acquired
Management's estimate of the fair value of the consideration shares
and net assets acquired, and the basis and assumptions applied
therein, are set out in note 9.
u) Critical accounting estimates and judgements (continued)
Fair value of derivative financial liabilities Management's
estimate of the fair value of the interest rate swap and
convertible loans, and the basis and assumptions applied therein,
are set out in note 19.
Business combinations
The Group has incurred expenses in respect of potential business
combinations which are under review. Historically, these costs were
carried on the consolidated statement of financial position in
current assets, where the Board considered that completion of the
business combination was highly probable. If those potential
business combinations were no longer deemed highly probable by the
Board, those costs were written off to the consolidated statement
of comprehensive income as an exceptional cost.
Effective from 28 December 2009, all costs incurred in respect
of business combinations have been written off to the consolidated
statement of comprehensive income as incurred, or capitalised as
part of the cost of raising debt or equity.
Share-based payments
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of equity instruments at
the date at which they are granted. Estimating the fair value for
share-based payment transactions requires determining the most
appropriate valuation model, which is dependent on the terms and
conditions of the grant. It also requires a determination of the
most appropriate inputs to the model selected. Further details are
outlined in note 24.
2. Segmental information
Management have determined the operating segments based on the
reports reviewed by the Board that are used for strategic
decisions. The Board assesses the performance of its operating
segments using earnings before interest, tax, depreciation and
amortisation (EBITDA) which is also adjusted to exclude impairment
losses, exceptional expenditure and share-based payment
charges.
The Group operates solely within one geographical segment being
the United Kingdom.
During 2009 and at the start of 2010, the Board reviewed one
operating segment, being that of the low stake high volume High
Street gaming sector which includes AGCs and FECs. These cash-based
gaming centres are operated and managed together, with the Board
assessing the Group's financial position and progression based on
the financial reports of these gaming centres as a whole.
However, the acquisition on 20 April 2010 of Beacon
Entertainments Limited and its subsidiaries, which operate 26 AGCs
and 6 Bingo clubs, has introduced a new operating segment into the
Group from that date, relating to their Bingo club activities.
These Bingo clubs are operated and managed together, with the Board
assessing the Bingo division's financial position and trading
progression based on the financial reports of these Bingo clubs as
a whole.
As a result, from 20 April 2010 the Group reports through two
operating segments, being High Street gaming centres and Bingo
clubs as analysed further below.
Due to the nature of the Group's operations there are considered
to be no major customers of the Group.
52 weeks ended 26 December
2010
-------------------------------
High
Street
Gaming Bingo
centres clubs Total
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------- --------- --------
Revenue 24,476 13,615 38,091
--------------------------------------------- ---------- --------- --------
Segment EBITDA * 4,781 2,324 7,105
Group overheads (1,288)
--------------------------------------------- ---------- --------- --------
Group EBITDA * 5,817
Impairment losses (relating solely to High
Street Gaming centres) (Note 9) (8,124) - (8,124)
Exceptional items (3,039)
Share-based payments charge (70)
Depreciation and amortisation (2,962)
--------------------------------------------- ---------- --------- --------
Operating loss (8,378)
--------------------------------------------- ---------- --------- --------
* Stated before impairment losses, exceptional costs and share-based
payment charges
2. Segmental information (continued)
Period ended 27 December
2009
-----------------------------
High
Street
Gaming Bingo
centres clubs Total
GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- --------
Revenue 11,883 - 11,883
------------------------------- --------- -------- --------
Segment EBITDA * 2,234 - 2,234
Group overheads (1,167)
------------------------------- --------- -------- --------
Group EBITDA * 1,067
Exceptional items (566)
Share-based payments charge (116)
Depreciation and amortisation (1,231)
------------------------------- --------- -------- --------
Operating loss (846)
------------------------------- --------- -------- --------
* Stated before exceptional costs and share-based payment
charges
The Group operates and manages its current assets, non-current
assets and liabilities on a centralised basis from its head office
in Milton Keynes. Accordingly, these assets and liabilities cannot
be allocated to specific segments, and therefore depreciation,
amortisation and interest income or expenditure also cannot be
allocated to an operating segment. As a result, no further
financial disclosure on assets and liabilities is deemed to be
necessary for segmental reporting purposes as the relevant
information is presented in the consolidated statement of financial
position and related notes.
3. Exceptional expenses
52 weeks ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------------------- --------------- -------------
Costs relating to aborted and ongoing
potential business combinations and
associated activities 756 134
Costs relating to successful business
combinations 1,904 -
Costs relating to closed premises 162 163
Redundancies arising from reorganisations 217 269
---------------------------------------------- --------------- -------------
3,039 566
---------------------------------------------- --------------- -------------
Costs relating to acquisitions, irrespective of whether the
acquisition is successfully completed or not, are charged to
exceptional expenses when incurred unless they are directly
attributable to the issue of debt or equity. As can be seen above,
the impact on the loss for the period due to the change in IFRS 3
(Revised) is GBP1.9 million and consequently has increased the loss
per share by 0.6 pence.
4. Operating loss
The following items have been charged/(credited) in arriving at
the operating loss:
52 weeks ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------- --------------------- -------------------
Depreciation of property, plant
and equipment 2,751 1,091
Amortisation of intangible assets 161 67
Amortisation of operating lease
premiums 50 73
Loss on disposal of property,
plant and equipment (18) (1)
Operating lease payments 4,118 1,329
Cost of inventories recognised as
an expense during the period 62 184
Auditors' remuneration:
- audit of the Company financial
statements 55 52
- audit of the subsidiary
companies' financial statements 70 39
Corporate finance services:
- current auditors 156 29
Other services pursuant to
legislation:
- current auditors 72 34
---------------------------------- --------------------- -------------------
Further auditors' remuneration relating to current auditors of
GBP390,000 (2009: GBP489,000) relating to corporate finance
services has been capitalised as part of the acquisition costs on
prior year business combinations or the cost of raising
finance.
5. Staff costs and Directors' emoluments
Staff costs
52 weeks Period
ended ended
26 December 27 December
2010 2009
GBP'000 GBP'000
--------------------------------------------- ------------ ------------
Staff costs (including Executive Directors)
Wages and salaries 10,285 3,912
Social security costs 774 323
Pension costs 142 102
Other staff costs 163 48
Expense of share-based payments 70 116
--------------------------------------------- ------------ ------------
11,434 4,501
--------------------------------------------- ------------ ------------
The expense of share-based payments has arisen from the approved
EMI share option scheme, the unapproved EMI share option scheme and
the SAYE share option scheme. Further details of these share option
schemes are given in note 24.
The monthly average number of employees including Directors
during the period was operational staff 641 (2009: 244) and
administrative staff 46 (2009: 35). There are no pension amounts
accruing at 26 December 2010 (2009: GBPnil).
Directors' remuneration
The cash emoluments or fees, and benefits received by the
Directors for the 52 weeks ended 26 December 2010 and the period
ended 27 December 2009 are set out below.
52 weeks ended
26 December
2010
Base Pension
salary/fees Bonus Benefits contribution Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- --------- --------- ------------- ---------
Executive
Directors:
Nicholas
Harding 257 100 16 39 412
Matthew
Proctor 155 100 9 23 287
Non-executive
Directors:
David Williams 40 - - - 40
Mark Watts * 25 - - - 25
Ben Shaw * 25 - - - 25
Blair Sinton 40 50 - - 90
Brian
Mattingley 26 - - - 26
Simon Thomas 15 - - - 15
583 250 25 62 920
--------------- ------------- --------- --------- ------------- ---------
* Note - Amount paid to third party for the service of the
Director
5. Staff costs and Directors' emoluments (continued)
Period ended
27 December
2009
Base Pension
salary/fees Bonus Benefits contribution Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- --------- --------- ------------- ---------
Executive
Directors:
Nicholas
Harding 250 - 16 38 304
Matthew
Proctor 150 - 9 22 181
Non-executive
Directors:
David Williams
* 40 - - - 40
Mark Watts * 25 - - - 25
Ben Shaw * 25 - - - 25
Blair Sinton 40 - - - 40
530 - 25 60 615
--------------- ------------- --------- --------- ------------- ---------
* Note - Amount paid to third party for the service of the
Director
Directors' interest in Ordinary shares
The notified interests of the Executive and Non-executive
Directors in the issued share capital of Praesepe plc are as
follows:
Number Number
of of
Ordinary Ordinary
shares shares
held held
under under
Number of the the
Ordinary approved approved
shares held EMI EMI
under the share share Number of Number of
SAYE share option option Ordinary Ordinary
option scheme scheme scheme shares as share as
(5 year term) as at 26 as at 27 at 26 at 27
as at 26 December December December December
December 2010 2010 2009 2010 2009
Number Number Number Number Number
--------------- -------------- --------- --------- ----------- -----------
Executive
Directors:
Nicholas
Harding 280,909 141,023 141,023 1,314,090* 1,179,090*
Matthew
Proctor 280,909 - - 405,000 270,000
Non-executive
Directors:
David Williams - - - 655,723 -
Mark Watts - - - - -
Ben Shaw - - - - -
Blair Sinton - - - 62,000 -
Brian - - - 4,000,000 -
Mattingley
Simon Thomas - - - 1,500,000 -
*N Harding's beneficial interest in the share capital of the
Company is largely held, together with that of certain of his
relatives, through a trust in the name of SG Hambros Trust Company
(Channel Islands) Limited.
The Executive Directors, N Harding and M Proctor also hold 2,796
and 1,434 A ordinary shares respectively in Praesepe (UK) Limited
under the terms of the Management Participation Shares incentive
scheme, details of which are provided in note 24 to these
accounts.
The Executive and Non-executive Directors are related parties
and further disclosures regarding transactions with certain of the
Directors are set out in note 22 to these accounts.
6. Net finance (cost)/revenue
52 weeks Period
ended ended
26 December 27 December
2010 2009
GBP'000 GBP'000
Interest receivable on bank deposits 3 3
Interest payable on loans and overdrafts (2,214) (547)
Fair value loss on interest rate swap: Cash flow
hedge transfer from hedging reserve (note 21) (427) -
(2,638) (544)
-------------------------------------------------- ------------ ------------
7. Taxation credit/(charge)
52 weeks Period
ended ended
26 December 27 December
2010 2009
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Tax credited/(charged) in the consolidated
statement of comprehensive income
Current income tax - (7)
Movement in deferred taxation 208 (40)
-------------------------------------------------- ------------ ------------
208 (47)
-------------------------------------------------- ------------ ------------
The current tax assessed on the loss before tax for the period
is not the same as the standard rate of corporation tax in the UK
of 28% (2009: 28%). The differences are reconciled below:
52 weeks
ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
------------------------------------------------- ------------ -------------
Loss on ordinary activities before taxation (11,016) (1,390)
Theoretical tax credit at United Kingdom
corporation tax rate of 28% (2009: 28%) 3,084 389
Effects of:
- exceptional expenditure that is not tax
deductible (impairment losses) (2,274) -
- other expenditure that is not tax deductible (770) (436)
- adjustment in respect of corporation tax rate
change 17 -
- adjustment relating to previous period 151 -
------------------------------------------------- ------------ -------------
208 (47)
------------------------------------------------- ------------ -------------
Factors that may affect future tax charges
A potential deferred tax asset of GBP1,352,000 (2009:
GBP1,066,000) has not been recognised as future recovery is
uncertain. The deferred tax asset not recognised is made up of
GBP3,580,000 (2009: GBP3,428,000) of losses carried forward
indefinitely, temporary differences of GBP920,000 (2009: GBPnil)
and capital allowances in excess of depreciation of GBP508,000
(2009: GBP381,000), calculated at 27% (2009: 28%).
It was announced in the Budget on 23 March 2011 that the UK
corporation tax rate will be reduced from 28% to 26% from 1 April
2011, and by a further 1% per annum thereafter until 1 April 2014
when the corporation tax rate will be 23%. The proposed rate
reductions will reduce the amount of future cash tax payments to be
made by the Group. Overall the reduction in the corporation tax
rate from 28% to 23% is not expected to significantly affect the
Group's net deferred tax liability, nor its unrecognised deferred
tax asset.
The Budget also proposed that from 1 April 2012, the rate of
capital allowances applicable to plant and machinery expenditure
will be reduced from 20% to 18% on a reducing balancing basis. The
rate of capital allowances applicable to long-term assets will be
reduced from 10% to 8% on a reducing balancing basis. Once enacted,
these changes to capital allowance rates will reduce the rate that
tax relief is given to qualifying capital expenditure, which will
advance cash tax payments. This will be offset by the proposed
reductions to the rate of corporation tax.
8. Loss per share
52 weeks
ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
------------------------- ------------ -------------
Numerator
Basic/diluted: net loss 10,808 1,437
------------------------- ------------ -------------
Number Number
-------------------------------- ------------ ------------
Denominator
Basic: weighted average shares 326,725,360 211,637,184
-------------------------------- ------------ ------------
Basic loss per share of 3.3 pence (2009: loss per share of 0.7
pence) is calculated by dividing the net loss for the period
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
The impact of the share options, Management Participation Shares
and Marwyn Participation Option, convertible loan notes and the
deferred contingent consideration payable in shares has not been
presented as they are anti-dilutive.
Details of the post period end share transactions that would
effect the loss per share if they had occurred before the end of
the reporting period are provided in note 26.
9. Goodwill
Total
GBP'000
-------------------------------------------- --------
Cost or valuation
At 1 January 2009 20,161
Recognised on acquisition through business
combination 10,874
-------------------------------------------- --------
At 27 December 2009 31,035
Adjustment to acquisition costs 54
Recognised on acquisition through business
combination 38,245
-------------------------------------------- --------
At 26 December 2010 69,334
-------------------------------------------- --------
Accumulated impairment losses
At 1 January 2009 -
Impairment losses for the period -
-------------------------------------------- --------
At 27 December 2009 -
Impairment losses for the period (8,124)
-------------------------------------------- --------
At 26 December 2010 (8,124)
-------------------------------------------- --------
Carrying amount
At 26 December 2010 61,210
-------------------------------------------- --------
At 27 December 2009 31,035
-------------------------------------------- --------
During the period ended 27 December 2009 the Group was required
to estimate the accruals for a number of the costs on the
acquisition of subsidiary undertakings. These accruals have now
been finalised resulting in an increase in previously recorded
goodwill of GBP54,000.
Business acquisition during the period - Beacon Entertainments
Limited and its subsidiaries
On 20 April 2010, Praesepe plc acquired 100% of the voting
equity share capital of Beacon Entertainments Limited for
GBP5,023,000 (excluding fees) payable by a combination of
63,333,334 ordinary shares to the vendors at a price of 7.5 pence
per share and GBP272,500 in cash. The premium at which the
consideration shares were issued has been recognised in the merger
reserve not as share premium, in accordance with the Companies Act
2006. Subject to the fulfilment of certain conditions, the vendors
may also receive up to 28,500,000 additional ordinary shares which
would have a maximum fair value of GBP2.85 million. If the
conditions are
9. Goodwill (continued)
not met no additional consideration shares would be issued, so
their fair value would be GBPnil. Management have reviewed the
conditions attaching to the potential additional ordinary shares
which may be issued to the vendors under certain conditions during
the period of 10 years from the date of acquisition, and assessed
their fair value at GBP131,000, based on management's best estimate
of the weighted probabilities attached to the various potential
outcomes discounted to their net present value at an appropriate
rate. The Group assumed GBP40,000,000 in secured bank debt as a
part of that acquisition. Goodwill arising on acquisition amounted
to GBP37.8 million.
The net assets of the business acquired on 20 April 2010, as
extracted from the acquiree's accounting records, and the
provisional fair value adjustments ascribed thereto based on
management's review to date, are set out below.
Provisional Provisional
fair values
Book fair value to
values adjustments the Group
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ------------ ------------
Other intangible assets (note 10) - 793 793
Property, plant and equipment 8,040 (184) 7,856
Operating lease premiums 80 - 80
Inventories 276 - 276
Prepayments and accrued income 3,302 (700) 2,602
Amounts relating to Rank VAT case (3,476) - (3,476)
Cash and cash equivalents 6,669 - 6,669
Trade and other payables (5,025) (290) (5,315)
Corporation tax payable (26) - (26)
Bank borrowings (40,000) - (40,000)
Derivative financial instrument:
interest rate swap (1,350) - (1,350)
Deferred tax receivable/(payable) 397 (92) 305
--------------------------------------- --------- ------------ ------------
Total fair value of net liabilities
acquired (31,113) (473) (31,586)
--------------------------------------- --------- ------------ ------------
Goodwill 37,792
--------------------------------------- --------- ------------ ------------
6,206
--------------------------------------- --------- ------------ ------------
Total consideration comprises:
Issue of ordinary shares (note 20) 4,750
Cash 273
--------------------------------------- --------- ------------ ------------
Sub Total 5,023
Payment of vendor deal costs 1,052
Deferred consideration 131
--------------------------------------- --------- ------------ ------------
Total consideration 6,206
--------------------------------------- --------- ------------ ------------
During the period, the net cash inflow arising from this
business combination was GBP6,396,500 which comprised cash and cash
equivalents acquired of GBP6,669,000 less the cash consideration
paid of GBP272,500. Included in cash acquired of GBP6,669,000 was
GBP3,476,000 held in relation to the Rank VAT reclaim case, held
for the benefit of previous shareholders (refer to note 25 for
further details).
The intangible assets identified on acquisition of GBP793,000
comprise premises licenses of GBP410,000, Beacon trading name of
GBP150,000, security systems of GBP99,000, operating licenses of
GBP74,000, customer lists of GBP50,000 and internet domains of
GBP10,000.
The goodwill arising on acquisition is attributable to the
highly regarded operation of the businesses acquired, their
prominent high street trading positions, the quality of staff taken
on, the Beacon bingo trading name and the long-established trading
record and consistent cash generation.
The revenue and operating profit attributed to the venues
acquired for the period since acquisition was GBP20.7 million and
GBP1.3 million respectively. If the acquisition of Beacon
Entertainments Limited had been completed on the first day of the
period, the revenue and the operating loss of the Group would have
been GBP47.3 million and GBP8.4 million respectively.
Business acquisition during the period - Eight AGC venues from
the Noble Organisation
On 20 September 2010, the Group acquired the trade and assets of
eight trading AGC venues from various members of the Noble
Organisation for a purchase consideration of GBP1,000,000
(excluding fees) payable in cash. The consideration was funded
through the issue of 13,333,333 new ordinary shares in Praesepe plc
at a price of 7.5 pence per share to Falcombe Holdings Limited, a
company connected to the rest of the Noble Organisation by common
ownership. Goodwill arising on acquisition amounted to GBP0.5
million and has been allocated to the Cashino CGU.
9. Goodwill (continued)
The net assets of the combined businesses acquired on 20
September 2010, as extracted from the acquiree's accounting
records, and the provisional fair value adjustments ascribed
thereto based on management's review to date, are set out
below.
Provisional Provisional
fair values
Book fair value to
values adjustments the Group
GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ------------ ------------
Other intangible assets (note 10) - 129 129
Property, plant and equipment 365 (102) 263
Premiums on operating leases 152 - 152
Prepayments and accrued income 63 - 63
Cash and cash equivalents 85 - 85
Total fair value of net assets acquired 665 27 692
---------------------------------------- -------- ------------ ------------
Goodwill 453
---------------------------------------- -------- ------------ ------------
1,145
---------------------------------------- -------- ------------ ------------
Total consideration comprises:
Cash 1,000
Additional cash cost to pay for
acquired cash and prepaid costs 145
---------------------------------------- -------- ------------ ------------
Total consideration 1,145
---------------------------------------- -------- ------------ ------------
During the period, the net cash outflow arising from this
business combination was GBP1,060,000 which comprised cash and cash
equivalents acquired of GBP85,000 less the cash consideration paid
of GBP1,000,000 and the additional cash costs of GBP145,000.
The intangible assets identified on acquisition of GBP129,000
comprise premises licenses of GBP100,000, computer systems of
GBP24,000 and GBP5,000 relating to non-compete agreements.
The goodwill arising on acquisition is attributable to the
highly regarded operation of the businesses acquired, their
prominent high street trading positions, the quality of staff taken
on and the long-established trading record and consistent cash
generation.
The revenue and operating profit attributed to the venues
acquired for the period since acquisition was GBP332,000 and
GBP56,000 respectively. If the acquisition of these businesses had
been completed on the first day of the period, the revenue and the
operating loss of the Group would have been GBP39.0 million and
GBP8.2 million respectively.
Fair value review of intangible assets
Following the completion of the two acquisitions during 2010,
management performed a detailed review of the assets acquired for
the purposes of identifying the fair value of any acquired
intangible assets. This review was performed separately for each
acquisition and considered the following types of intangible
assets: contract based intangibles (such as supplier contracts and
licences, employee contracts and lease agreements); customer
related assets (such as customer lists); trademarks, trade names
and other marketing related intangibles; non-compete agreements;
and technology based intangibles. Management's review of intangible
assets and their estimated fair values have been discussed and
approved by the Board of Directors.
Impairment review of intangible assets with indefinite lives
As stated in the accounting policies, the Group performs an
annual impairment review for goodwill and other intangible assets
with indefinite lives, by comparing the carrying amount of these
assets with their recoverable amount. Testing is carried out by
allocating the carrying value of these assets to groups of
cash-generating units.
The recoverable amounts of the cash-generating units are
determined by value in use calculations. Management estimates the
discount rate used in these value in use calculations using pre-tax
rates that reflect current market assessments of the time value of
money and the risks specific to the cash-generating units. The
Group prepares cash flow forecasts derived from the following
periods budget to EBIT for each cash-generating unit. The budgets
used have been approved by management and reflect the past
performance of the cash-generating unit adjusted for the forecast
cost base and revenue growth. The forecast cash flows are then
extrapolated by a growth rate, approximating the long term economic
growth rate. The impairment review also takes into account the
implications of the offer from Marwyn Management Partners plc
("MMP"), which is summarised further in note 26.
The discount rate applied in 2010 to the future cash flows of
the cash-generating units was 12.0% (2009: 10.4%). The rate of
return assumed by management to be implicit in the terms of MMP's
offer to acquire the Company which was received after the reporting
date is broadly consistent with the discount rate that was used by
management in the annual impairment review. Cash flows beyond the
budget period are extrapolated using a 2.0% growth rate (2009:
2.5%).
Prior to the impairment review, the carrying value of the
Group's goodwill was GBP69.3 million (2009: GBP31.0 million). As
there has been no previous impairments, this reflected the amounts
arising from the acquisition of businesses.
For impairment testing, the Group has been separated into three
cash-generating units: (i) the Cashino business including those
businesses it has acquired direct and those businesses which have
been hived up in to the Cashino business; (ii) United Leisure
Limited; and (iii) Beacon Entertainments Limited.
9. Goodwill (continued)
As a result of the impairment testing, the Directors have
concluded that the carrying values of the Cashino and United
Leisure goodwill were impaired at the reporting date as the
carrying values of the cash-generating units, to which the goodwill
has been allocated, exceeded the recoverable amounts as determined
by their value in use. The Cashino and United Leisure goodwill has
been written down by GBP4,916,000 and GBP3,208,000
respectively.
The impairment losses have decreased the carrying value of
goodwill, and reduced the reported results, in the period by
GBP8,124,000 and increased the loss per share by 2.5 pence.
A summary of the carrying value of goodwill, together with the
impact of the impairment review, as at 26 December 2010 by
cash-generating unit, is as follows:
Carrying
value of
goodwill
Carrying as at 26 Carrying
value of Acquisitions December value of
goodwill and 2010 prior goodwill
as at 27 adjustments to as at 26
Cash-generating December in the impairment Impairment December
unit 2009 period review losses 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- ------------- ----------- ----------- ---------
Cashino 27,425 507 27,932 (4,916) 23,016
Beacon
Entertainments - 37,792 37,792 - 37,792
United Leisure 3,610 - 3,610 (3,208) 402
----------------- --------- ------------- ----------- ----------- ---------
31,035 38,299 69,334 (8,124) 61,210
----------------- --------- ------------- ----------- ----------- ---------
The activities of the Cashino and United Leisure cash-generating
units reside in the High Street Gaming centre operating segment.
The impairment losses recognised against the Cashino and United
Leisure cash-generating units have therefore been recorded in the
High Street Gaming centre operating segment (note 2).
SENSITIVITY ANALYSIS
The key assumptions for the value in use calculations are those
regarding discount rates, growth rates and projected cash
flows.
Following the impairment losses booked in the period, the
estimated recoverable amounts of the Cashino and United Leisure
cash-generating units were in line with their carrying values. As
such, any adverse change in these key assumptions would result in
further impairment.
The sensitivity to movements in the key assumptions has been
given below for illustrative purposes:
a) a fall in projected trading cash flows of 15.5%, or an
increase in the discount rate of 5.1% to 17.1% would result in the
Beacon cash-generating unit having a nil impairment headroom;
b) a fall in projected trading cash flows of 1% would result in
further impairment of the Cashino and United Leisure
cash-generating units of GBP895,000 and GBP24,000 respectively;
and
c) an increase in the discount rate of 1% would result in
further impairment of the Cashino and United Leisure
cash-generating units of GBP2,849,000 and GBP55,000
respectively.
10. Other Intangible assets
Licences Trademarks Other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- ----------- -------- --------
Cost
At 1 January 2009 485 25 15 525
Acquired through business
combinations 318 50 60 428
Additions - - 22 22
---------------------------------- --------- ----------- -------- --------
At 27 December 2009 803 75 97 975
Acquired through business
combinations 510 150 262 922
At 26 December 2010 1,313 225 359 1,897
---------------------------------- --------- ----------- -------- --------
Amortisation
At 1 January 2009 20 - 1 21
Charge for the period 59 3 5 67
---------------------------------- --------- ----------- -------- --------
At 27 December 2009 79 3 6 88
Charge for the period 114 19 28 161
---------------------------------- --------- ----------- -------- --------
At 26 December 2010 193 22 34 249
---------------------------------- --------- ----------- -------- --------
Net book value
At 26 December 2010 1,120 203 325 1,648
---------------------------------- --------- ----------- -------- --------
At 27 December 2009 724 72 91 887
---------------------------------- --------- ----------- -------- --------
Other intangible assets include customer lists, internet domains
and security systems.
11. Premiums on operating leases
Total
GBP'000
---------------------------------------- --------
Cost or valuation
At 1 January 2009 440
Additions 14
---------------------------------------- --------
At 27 December 2009 454
Acquired through business combinations 232
---------------------------------------- --------
At 26 December 2010 686
---------------------------------------- --------
Amortisation
At 1 January 2009 -
Charge for the period 73
---------------------------------------- --------
At 27 December 2009 73
Charge for the period 50
---------------------------------------- --------
At 26 December 2010 123
---------------------------------------- --------
Net book value
At 26 December 2010 563
---------------------------------------- --------
At 27 December 2009 381
---------------------------------------- --------
During 2008 and 2009, Praesepe plc acquired a number of
operating leases for AGC sites, which are to be rebranded as
Cashino sites and integrated with the trading subsidiaries.
Amortisation has been provided over the terms of the leases.
12. Property, plant and equipment
Plant Fixtures
Land and and and
buildings equipment fittings Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- --------- --------
Cost
At 1 January 2009 5,877 1,221 1,213 8,311
Additions 103 216 376 695
Acquired through business
combinations 86 933 340 1,359
Disposals - (14) - (14)
--------------------------------- ---------- ---------- --------- --------
At 27 December 2009 6,066 2,356 1,929 10,351
Additions 278 785 288 1,351
Acquired through business
combinations (note 9) 4,817 772 2,530 8,119
Disposals - (20) (2) (22)
--------------------------------- ---------- ---------- --------- --------
At 26 December 2010 11,161 3,893 4,745 19,799
--------------------------------- ---------- ---------- --------- --------
Depreciation
At 1 January 2009 114 85 169 368
Depreciation charge for the
period 253 481 357 1,091
Disposals - (13) - (13)
--------------------------------- ---------- ---------- --------- --------
At 27 December 2009 367 553 526 1,446
Depreciation charge for the
period 395 1,111 1,245 2,751
Disposals - (3) (1) (4)
--------------------------------- ---------- ---------- --------- --------
At 26 December 2010 762 1,661 1,770 4,193
--------------------------------- ---------- ---------- --------- --------
Net book value
At 26 December 2010 10,399 2,232 2,975 15,606
--------------------------------- ---------- ---------- --------- --------
At 27 December 2009 5,699 1,803 1,403 8,905
--------------------------------- ---------- ---------- --------- --------
The Group's bank loan (details of which are set out in note 17)
is secured on the Group's freehold property.
Included in the net book value of plant and equipment is
GBP250,000 (2009: GBPnil) carrying value of machines purchased in
the period on finance leases.
13. Inventories
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
---------------- ------------ ------------
Finished goods 427 89
---------------- ------------ ------------
14. Prepayments and accrued income
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Prepayments and accrued income 1,780 797
Other receivables 615 342
Prepaid costs relating to future business
combinations - 469
-------------------------------------------------- ------------ ------------
2,395 1,608
-------------------------------------------------- ------------ ------------
Prepayments and accrued income do not contain any impaired
assets.
15. Cash and cash equivalents
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
-------------------------- ------------ ------------
Cash at bank and in hand 7,542 3,588
-------------------------- ------------ ------------
Included in cash as at 26 December 2010 is GBP2.9 million
received in respect of historical VAT reclaims which are for the
benefit of previous shareholders. This cash was subsequently paid
over to the previous shareholders during January 2011. Cash at bank
earns interest at floating rates based on bank deposit rates.
Short-term deposits are made for varying periods dependent on the
immediate cash requirements of the Group. The book value of cash
and cash equivalents approximates to their fair value.
As at 27 December 2009, there was GBP1.0 million held in escrow
at the request of the bank following the United Leisure
acquisition. These funds were released from escrow during the
period.
16. Trade and other payables
As at As at
26 27
December December
2010 2009
GBP'000 GBP'000
---------- ----------------------------------------- -----------------------------------------
Trade
payables 2,798 2,194
Other
payables 4,329 265
Accruals
and
deferred
income 1,061 527
---------- ----------------------------------------- -----------------------------------------
8,188 2,986
---------- ----------------------------------------- -----------------------------------------
Trade and other payables are non-interest bearing and it is the
Company's policy to pay within the stated terms or other period as
agreed with the supplier. Due to their short maturities, the book
value of trade payables approximates to their fair value.
17. Loans, borrowings and derivative financial liabilities
Interest Loan Pension
Bank Rate fund
loan SWAP notes loan Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- --------- -------- -------- --------
As at 1 January 2009 3,674 - - - 3,674
Issued to fund acquisition - - 6,500 - 6,500
Interest accrued 121 - 137 - 258
Acquired through business
combinations 2,352 - - 295 2,647
Cost of raising finance
acquired through business
combinations (200) - - - (200)
Repayment of loan during
the period (352) - - - (352)
--------------------------- -------- --------- -------- -------- --------
At 27 December 2009 5,595 - 6,637 295 12,527
Interest accrued 238 - 673 - 911
Transfer of convertible
loan note equity
component to reserves - - (385) - (385)
Acquired through business
combinations 40,000 1,350 - - 41,350
Cost of raising finance
acquired through business
combinations (1,403) - - - (1,403)
Unwinding of fair value on
interest rate swap - (427) - - (427)
Fair value loss on
interest rate swap during
the period - 439 - - 439
Repayment of loan during
the period (3,750) - - - (3,750)
--------------------------- -------- --------- -------- -------- --------
At 26 December 2010 40,680 1,362 6,925 295 49,262
--------------------------- -------- --------- -------- -------- --------
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
------------- ------------ ------------
Current 5,718 4,545
Non-current 43,544 7,982
------------- ------------ ------------
49,262 12,527
------------- ------------ ------------
The bank debt is secured on the Group's freehold properties and
the Group has given cross guarantees in relation to the bank debt.
There are amortising capital repayments during the life of the
loans, with the repayment of any unamortised amounts due on the
maturity dates of the loans, details of which are set out in note
19. The interest charge is linked to LIBOR and is paid every
quarter.
17. Loans, borrowings and derivative financial liabilities
(continued)
The bank provider of this loan has, under certain circumstances,
the right to set-off the cash deposits it holds on behalf of the
Group against the loan balance.
In line with usual arrangements in respect of bank debt
facilities, the bank loan agreement requires the Group to comply
with certain financial and non-financial covenants.
The loan notes of GBP6.5 million were issued on 19 October 2009
to provide funding for the acquisition of the trade and assets of
13 trading sites from Case Concepts Limited, its subsidiaries and
related businesses.
The loan notes are unsecured and they accrue interest at a rate
of 11% per annum (compounding annually), settled through the
issuance of additional loan notes. The loan notes have no voting
rights, and mature on the later of three years from the date of
their issue (the "Issue Date") or 20 business days after Praesepe's
senior debt facilities mature under their existing terms or under
any terms post refinancing, with a long stop date of 9 October 2014
(Maturity). It was also the intention that the loan notes would
subsequently become convertible loan notes once the appropriate
shareholder approval had been received at the Company's next
general meeting. Prior to conversion, the loan notes have no right
to receive amounts in respect of or in lieu of any dividends or
distributions on the ordinary shares.
At the Company's general meeting on 1 March 2010, the
shareholders approved the necessary resolutions to grant conversion
rights to the loan notes, which are now convertible to ordinary
shares at a conversion price of 9.0 pence per share. As a result,
the loan notes as originally presented in the accounts were
de-recognised and the convertible loan note instrument was
re-recognised in the accounts at the fair value of its respective
debt and equity elements. The other terms of the loan notes remain
unchanged from those summarised above, with the exception that
conversion can occur during the period from March 2010 until 20
business days prior to their maturity.
18. Deferred tax liabilities
Deferred taxation provided in the accounts is as follows:
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
-------------- ---------------------------------------- ----------------------------------------
Capital
allowances
in excess of
depreciation 129 318
Other
temporary
differences 172 387
-------------- ---------------------------------------- ----------------------------------------
301 705
-------------- ---------------------------------------- ----------------------------------------
GBP'000
----------------------------------------------------------------- --------
At 1 January 2009 529
Acquired through business combinations 16
Deferred tax on fair value adjustments on business combinations
recognised in goodwill 120
Deferred tax arising on trade and assets acquisition recognised
in the consolidated statement of comprehensive income 167
Reversal of temporary differences in the consolidated statement
of comprehensive income (127)
----------------------------------------------------------------- --------
At 27 December 2009 705
Deferred tax on swap acquired through business combination (378)
Deferred tax impact of movement in swap reported through other
reserves (4)
Deferred tax on the equity element of the convertible loan
note 111
Deferred tax acquired through business combinations (19)
Deferred tax on fair value adjustments on business combinations
recognised in goodwill 92
Arising on change in rate of corporation tax (23)
Adjustment relating to previous period (151)
Reversal of temporary differences in the consolidated statement
of comprehensive income (32)
----------------------------------------------------------------- --------
At 26 December 2010 301
----------------------------------------------------------------- --------
19. Financial instruments and risk management
The Group's principal financial instruments comprise Sterling
cash and bank deposits, the bank and other loans (including the
convertible loan notes), the interest rate swap and trade and other
payables that arise directly from its operations.
SIGNIFICANT ACCOUNTING POLICIES
Details of significant accounting policies and methods adopted
(including the criteria for recognition, the basis of measurement
and the basis for recognition of income and expenses) for each
class of financial asset, financial liability, equity instrument
and the interest rate swap are disclosed in the accounting
policies.
CATEGORIES OF FINANCIAL INSTRUMENT
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
------------------------------------------------ ------------- -------------
Financial assets - classified as cash and
receivables: Other receivables Cash at bank 615 342
balances 7,542 3,588
------------------------------------------------ ------------- -------------
8,157 3,930
------------------------------------------------ ------------- -------------
Financial liabilities - measured at amortised
cost:
Borrowings 47,900 12,527
Trade payables 2,798 2,194
Other payables 5,302 265
Accruals 1,061 527
------------------------------------------------ ------------- -------------
57,061 15,513
------------------------------------------------ ------------- -------------
Derivative used for hedging: 1,362 -
Interest rate swap
------------------------------------------------ ------------- -------------
1,362 -
------------------------------------------------ ------------- -------------
BORROWING FACILITIES The Group had no undrawn borrowing
facilities available at the period end (2009: GBPnil).
RISK MANAGEMENT
The main risks arising from the Group's financial instruments
are interest rate risk and liquidity risk.
The Group is not subject to significant credit risk due to the
nature of the Group's business which is cash based. The total
exposure in respect of credit risk is GBP9.6 million comprising
GBP4.9 million cash (excluding cash in machines) and GBP4.7 million
other receivables. Credit reports on counterparties are reviewed to
manage this risk and there was no indication of significant risk at
the period end.
The Group has no exposure to foreign currency risk as it has
minimal overseas transactions in terms of exploring future
acquisitions, nor significant exposure to pricing risk (as no
financial instruments, other than the interest rate swap, are
carried at market value). The Group does not use derivative
financial instruments for speculative purposes.
INTEREST RATE RISK
The Group finances its operations through a mixture of retained
cash, bank borrowings and convertible loan notes. At the end of the
period, the Group held borrowings as follows:
Underlying
Amount Interest
Loan GBP'000 Repayment Terms Rate
-------------------------- ----------- ------------------------ -----------
Amortising loan with
final bullet payment in
Bank 42,000 April 2015 LIBOR + 3%
Redeemable/convertible
Loan notes 6,500 October 2014 11%
Pension loan 295 Amortising loan to Base rate
September 2013 + 3%
Cash deposits (excluding (4,942) On demand Negligible
machine floats)
19. Financial instruments and risk management (continued)
As a part of the acquisition of Beacon Entertainments Limited,
the Group acquired a fixed interest rate swap. This swap is
discussed further below under the section entitled "Hedging".
The weighted average interest rate on borrowings was 6.17% for
the period (2009: 5.91%). A 1% movement in LIBOR on the unhedged
portion of the bank debt would result in an increase or decrease in
interest payable of GBP120,000. A 1% movement in the base rate
would have a negligible impact on the pension loan interest of
GBP3,000. The Group analyses its interest rate exposure on its
variable rate borrowings in order to identify its potential
exposure to changes in UK interest rates on its variable rate
debt.
LIQUIDITY RISK
Liquidity risk is the risk that the Group is unable to meet its
payment obligations associated with its liabilities as they fall
due. It should be noted that this is a cash business, there are no
trade receivables and trade payables primarily relate to fixed
overhead costs. The Group's risk therefore relates to meeting its
financial commitments. The Group seeks to manage this risk by
ensuring sufficient liquidity is available to meet foreseeable
needs and investing cash assets safely and profitably. The Group
reviews its available cash position against current liabilities on
a regular basis taking into account the dates on which liabilities
fall due. The Group currently holds all deposits on demand. The
contractual maturity of the financial liabilities is presented
below.
CONTRACTUAL MATURITY OF FINANCIAL LIABILITIES
As at 26
December
2010
Trade and Interest
Other Loan rate Pension
payables Bank Loan Notes swap Loan Total
2010 2010 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- --------- --------- --------- ---------
On demand
Within
one year
Between
one and 9,161 - - - - 9,161
five - 5,000 - 618 100 5,718
years - 35,680 6,925 744 195 43,544
9,161 40,680 6,925 1,362 295 58,423
---------- ---------- ---------- --------- --------- --------- ---------
Trade and Interest
other Bank Loan rate Pension
As at 27 payables Loan Notes swap Loan Total
December 2009 2009 2009 2009 2009 2009
2009 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ---------- --------- --------- --------- --------- ---------
On demand 2,459 - - - - 2,459
Within one
year - 4,250 - - - 4,250
Between
one and
five
years - 1,345 6,637 - 295 8,277
----------- ---------- --------- --------- --------- --------- ---------
2,459 5,595 6,637 - 295 14,986
----------- ---------- --------- --------- --------- --------- ---------
Details of the interest rates and security relating to the loans
are provided above and in note 17 respectively.
MANAGEMENT AND CAPITAL
The capital employed by the Group is composed of equity
attributable to shareholders and bank loans, details of which are
included in note 17. The primary objective of the Group is
maximising shareholders' value through growth by acquisition. The
capital structure is therefore maintained at a level suitable for
the Group's size, strategy and underlying business risk. As noted
previously, during the period the Group repaid GBP3.8 million of
bank debt and acquired GBP40.0 million of bank debt as a part of
the Beacon acquisition. The directly attributable costs relating to
the bank debt amounted to GBP1.4 million.
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The fair values of financial assets and financial liabilities
are determined as follows:
-- Interest rate swaps are measured at the present value of
future cash flow estimates and discounted based on the applicable
yield curves derived from quoted interest rates.
19. Financial instruments and risk management (continued)
-- The fair value of other non-derivative financial assets and
financial liabilities are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis
using prices from observable current market transactions and dealer
quotes for similar instruments.
On 1 March 2010, the shareholders approved the necessary
resolutions to grant conversion rights to the loan notes. As a
result, the loan notes were de-recognised and the convertible loan
note instrument was re-recognised at the fair value of its
respective debt and equity elements. The fair value of the debt
element of the loan notes was determined assuming redemption in
October 2014, a 12% rate of interest for the entirety of the loan
and constant credit risk margins.
The carrying amount of financial assets and liabilities recorded
at amortised cost in the financial statements are approximately
equal to their fair values.
Movements in the fair value of the interest rate swap in the
period are as follows:
GBP'000
------------------------------------------ --------
Interest rate swap fair value:
Fair value liability at acquisition 1,350
Transfer to finance costs in the period (427)
Fair value loss since acquisition 439
------------------------------------------ --------
Fair value liability at 26 December 2010 1,362
------------------------------------------ --------
In the case of bank loans and cash deposits, the fair value
approximates to the carrying value reported in the consolidated
statement of financial position as all balances are at floating
rate where payments are reset to market rates at intervals of less
than one year.
Fair value hierarchy
The hierarchy of the Group's financial instruments carried at
fair value at 26 December 2010 is as follows:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Liabilities held at fair
value:
Interest rate swap - 1,362 - 1,362
- 1,362 - 1,362
------------------------------------- --------- --------- ---------
The interest rate hedging swap has been classified as level 2 in
the hierarchy as its fair value is determined using inputs that are
observable either directly or indirectly.
HEDGING
As part of the acquisition of Beacon Entertainments Limited, the
Group acquired a fixed interest rate swap which has been
renegotiated such that the Group receives interest at the floating
LIBOR rate and pays a fixed rate of interest on 71.43% of the bank
debt throughout the life of the bank debt. At the reporting date,
the bank debt was GBP42.0 million and the swap notional was GBP30.0
million. The swap notional will reduce to GBP17.1 million over the
five years since its renegotiation prior to the loan's redemption,
at which time the bank debt will be GBP24.0 million. The fixed rate
of interest paid on the 71.43% of the bank debt covered by the swap
is 2.45% increasing to 4.10% over the next five years.
As detailed in the accounting policies, the Group has designated
this interest rate swap, hedging LIBOR variable rate borrowings, as
a cash flow hedge. The cash flows of the hedged item (the
borrowings) and the hedging instrument (the interest rate swap)
arise on the same quarterly dates. The swap notional has been
staggered such that it is 71.43% of the bank debt throughout the
life of the bank debt. The swap also expires on the date of
redemption of the bank debt. On inception, the swap was expected to
be 100% effective in its hedging objective, to swap floating LIBOR
rate interest for a fixed rate of interest on 71.43% of the bank
debt, throughout its life until expiry. In the period, there is no
ineffective hedging portion requiring the recognition of a gain or
loss in the income statement, nor is an ineffective portion
anticipated throughout the life of the swap.
The following table details the Group's liquidity analysis for
its interest rate swap. The table has been drawn up based on the
undiscounted net cash inflows/(outflows) on the swap that settle on
a net basis and the undiscounted gross inflows and (outflows) on
the swap that require gross settlement. The amounts disclosed have
been determined by reference to the projected interest rates at the
reporting date.
19. Financial instruments and risk management (continued)
Less than 1 - 2 2 - 3 3 - 4 4 - 5
1 year years years years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- --------- ---------- ---------
Interest
rate
swap 662 458 262 154 23 1,559
---------- ---------- --------- --------- --------- ---------- ---------
20. Authorised and issued share capital
As at As at As at
26 December 27 December 31 December
2010 2009 2008
--------------------------------- ------------- ------------- -------------
Authorised
Ordinary shares of 1 pence each
(2009: 10 pence each):
- number 400,000,000 400,000,000 400,000,000
- nominal value (GBP) 4,000,000 40,000,000 40,000,000
--------------------------------- ------------- ------------- -------------
Deferred ordinary shares of 9
pence each:
- number 400,000,000 - -
- nominal value (GBP) 36,000,000 - -
--------------------------------- ------------- ------------- -------------
Total nominal value authorised
(GBP) 40,000,000 40,000,000 40,000,000
--------------------------------- ------------- ------------- -------------
Issued, called up and fully paid
Ordinary shares of 1 pence each
(2009: 10 pence each):
- number 376,780,305 220,113,638 169,113,638
- nominal value (GBP) 3,767,803 22,011,364 16,911,364
--------------------------------- ------------- ------------- -------------
Deferred ordinary shares of 9
pence each:
- number 220,113,638 - -
- nominal value (GBP) 19,810,227 - -
--------------------------------- ------------- ------------- -------------
Total nominal value issued (GBP) 23,578,030 22,011,364 16,911,364
--------------------------------- ------------- ------------- -------------
The movement in the Company's issued share capital during the
period from 1 January 2009 to 27 December 2009, and the 52 weeks
ended 26 December 2010 is summarised below.
Share
Capital
GBP'000
------------------------------- ---------
At 1 January 2009 16,911
Share issue 2 March 2009 5,100
At 27 December 2009 22,011
Share Issue 30 March 2010 800
Share Issue 20 April 2010 634
Share issue 20 September 2010 133
------------------------------- ---------
At 26 December 2010 23,578
------------------------------- ---------
20. Authorised and issued share capital (continued)
On 2 March 2009, the Company placed 51,000,000 ordinary shares
of 10 pence each at a placing price of 10 pence per share to raise
GBP5.1 million.
On 1 March 2010 the share capital of the Company was reorganised
by subdividing each existing ordinary share of 10 pence into one
new ordinary share of 1 pence and one deferred share of 9 pence.
The new ordinary shares have the same rights (including voting and
dividend rights) as each previously issued ordinary share had. The
rights attaching to the deferred shares can be summarised as
follows:
-- they do not entitle holders to receive any dividend or other
distribution or to receive notice or speak or vote at general
meetings of the Company;
-- on a return of assets on a winding up, they only entitle the
holder to the amounts paid up on such shares after the repayment of
GBP10 million per new ordinary share;
-- they are not freely transferable;
-- the creation and issue of further shares which rank equally
or in priority to the deferred shares or the passing of a
resolution of the Company to cancel the deferred shares or to
effect a reduction of capital shall not constitute a modification
or abrogation of their rights; and
-- the Company shall have the right at any time to purchase all
of the deferred shares for an aggregate consideration of
GBP1.00.
The Company announced on 2 March 2010 that the shareholders had
approved the necessary resolutions to grant conversion rights to
the loan notes, which are now convertible to ordinary shares at a
conversion price of 9.0 pence per share. In addition on 30 March
2010, the Company completed the placing of 80,000,000 ordinary
shares of 1 pence each at a placing price of 7.5 pence per share to
raise GBP6.0 million before expenses.
On 20 April 2010, the Group completed the acquisition of Beacon
Entertainments Limited for GBP5.0 million (excluding fees) payable
by a combination of 63,333,334 ordinary shares to the vendors at a
price of 7.5 pence per share and GBP272,500 in cash. Subject to the
fulfilment of certain conditions, the vendors may also receive up
to 28,500,000 additional ordinary shares. The Group assumed GBP40.0
million in secured bank debt as a part of that acquisition.
On 20 September 2010, the Group acquired eight operating AGCs
for a purchase consideration of GBP1.0 million (excluding fees)
payable in cash, which was funded through the issue of 13,333,333
ordinary shares at a price of 7.5 pence per share.
The directly attributable costs of the three share issues
summarised above of GBP448,000 have been charged to reserves.
Details of the share options over ordinary shares are presented
in note 24.
21. Other Reserves As at 26 December 2010
Ordinary
Share- shares
Convertible based to be
loan Hedging payments issued
note reserve reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- ------------ -------- --------- --------- --------
At 1 January 2009 - - 52 - 52
Share-based payments
charge - - 116 - 116
------------------------ ----- ------------ -------- --------- --------- --------
At 27 December 2009 - - 168 - 168
Cash flow hedge:
- Fair value
loss since
acquisition - (439) - - (439)
- Tax on
fair value
loss since
acquisition - 123 - - 123
- Transfer
to finance
costs in
the period 6 - 427 - - 427
- Tax on
transfer to
finance
costs - (119) - - (119)
Convertible loan note
equity component 17 385 - - - 385
Tax on equity component
on convertible loan
note (111) - - - (111)
Share-based payments
charge - - 70 - 70
Ordinary shares to be
issued - - - 131 131
At 26 December 2010 274 (8) 238 131 635
------------------------ ----- ------------ -------- --------- --------- --------
21. Other Reserves (continued)
The expense of share-based payments has arisen from the approved
EMI share option scheme, the unapproved EMI share option scheme and
the save as you earn share option scheme. Full details of these
share options schemes are set out in note 24 to these accounts.
22. Related party transactions Marwyn Value Investors LP, a
substantial shareholder in the Company, is managed on an arm's
length basis by Marwyn Investment Management LLP. Marwyn Value
Investors LP currently holds 100,316,964 ordinary shares via its
nominee, Vidacos Nominees Limited, representing 24.8% of the issued
equity of the Company. Two of the Non-executive Directors are
partners of Marwyn Capital LLP and Marwyn Investment Management
LLP, and are directors and shareholders of various Marwyn group
companies. During the 52 weeks ended 26 December 2010, Marwyn
Capital LLP invoiced the Company GBP569,653 in fees relating to
corporate finance advisory services and Directors' fees as
disclosed in note 5 (period ended 27 December 2009:
GBP1,068,017).
During the 52 weeks ended 26 December 2010, the Company paid
Marwyn Partners Limited GBP2,820 for office and infrastructure
expenses (period ended 27 December 2009: GBP36,302). The
accommodation and support services agreement with Marwyn Partners
Limited was terminated by the Company during 2009.
As at 26 December 2010, the Company owed Marwyn Capital LLP
GBP24,798 (period ended 27 December 2009: GBP524,019) and Marwyn
Partners Limited GBP105 (period ended 27 December 2009: GBP1,028).
No amounts have been written off or impaired during the period.
Marwyn Management Partners LP has been granted the Marwyn
Participation Option, the details of which are described in the
accounting policies and in note 24 to these accounts.
As at 26 December 2010, Marwyn Value Investors LP held loan
notes of GBP6,470,000 (2009: GBP6,470,000) and Mr M Proctor held
loan notes of GBP30,000 (2009: GBP30,000). Details of the loan
notes are set out in note 17 to these accounts.
A Non-executive Director is a recipient of certain of the
potential VAT reclaim amounts, which are detailed in note 25.
23. Obligations under operating leases
The Group has entered into commercial leases on certain
property, plant and equipment. These leases have durations between
one and 20 years. Future minimum rentals payable under
non-cancellable operating leases at 26 December 2010 are as
follows:
52 weeks
ended Period ended
26 December 27 December
2010 2009
GBP'000 GBP'000
--------------------------------------------- ------------ -------------
Expiry date
Within one year 220 25
After one year but not more than five years 4,484 915
After five years 47,222 25,977
--------------------------------------------- ------------ -------------
51,926 26,917
--------------------------------------------- ------------ -------------
The Group's current leases do not include any contingent rents,
purchase options, exclusion clauses or any other such
restrictions.
24. Share-based payment and long-term incentive plans
Praesepe plc has an approved employee Enterprise Management
Incentive ("EMI") share option scheme ("the Approved scheme"), an
unapproved EMI share option scheme ("the Unapproved share option
scheme"), a Save As You Earn ("SAYE") share option scheme,
Management Participation Shares ("MPS") and a Marwyn Participation
Option ("MO"). The plans and their performance conditions are
described in detail in note 1.r of the accounting policies. The
valuation of each of the plans was undertaken using the
Black-Scholes-Merton model, and the key assumptions used are as
follows:
SAYE SAYE
Scheme Scheme Unapproved Approved
(3 year (5 year EMI EMI
term) term) Scheme Scheme MPS MO*
---------------- -------- -------- ----------- --------- ------- -------
19 25 25
29 July 29 July 25 May August June June
Date of grant 2010 2010 2010 2008 2008 2008
Ordinary share
price at date
of grant 6.9p 6.9p 7.5p 25p 29p 29p
Exercise price 5.5p 5.5p 12.0p 22p n/a 10p
Volatility 25% 25% 25% 60% 60% 60%
Expected option 3.5 5 5
life 3 years 5 years 3 years years years years
Dividend yield - - - - - -
Risk-free
interest rate 4% 4% 4% 4% 4% 4%
Market-related
performance
conditions - - - - 100% 100%
Fair value 2.3p 3.0p 4.3p 12.51p - -
---------------- -------- -------- ----------- --------- ------- -------
* Subject to a number of provisions, the MO may be exercised to
subscribe for a number of ordinary shares at an exercise price
equal to the 1 pence nominal value per ordinary share such that the
MO has an aggregate value equivalent to 10% of the increase in
shareholder value of the Company (as defined in note 1.r of the
accounting policies) calculated after deducting the exercise
price.
24. Share-based payment and long-term incentive plans
(continued)
The expected volatility was determined by reference to
historical volatilities over the period since listing and
reflecting the fact that Praesepe plc was a cash shell for a
significant portion of that period. The risk-free rate of return is
based on United Kingdom Government bond yields to maturity as at
the date of grant. The expected remaining life of the options was
matched to the time to maturity of the bonds. Within the EMI
charge, it is assumed that the leavers rate is 24% (2009: 14%).
There are no performance criteria attached to the EMI or SAYE
options. The performance criteria attached to the MPS and the MO
are considered to have such a remote likelihood of being achieved
that the values are discounted 100% for these market-related
conditions.
Details of options granted and those which were forfeited over
the period ended 27 December 2009 and the period ended 26 December
2010 are shown below:
Number Number
of SAYE of SAYE Number
(3 year (5 year Number of
term) term) of Unapproved Approved
share share EMI share EMI share
options options options options
outstanding outstanding outstanding Outstanding
Number Number Number Number
At 1 January
2009 - - - 3,382,274
Exercised
during the
period - - - -
Forfeited 5 May
2009 - - - (318,182)
Forfeited 28
August 2009 - - - (141,023)
---------------- ------------- ------------- --------------- -------------
At 27 December
2009 - - - 2,923,069
Issued 25 May
2010 - - 23,758,334 -
Issued 10 June
2010 1,191,260 2,887,735 - -
Exercised
during the
period - - - -
Forfeited 5
July 2010 - - (2,250,000) -
Forfeited 18
July 2010 - - (500,000) -
Forfeited 31
July 2010 - - - (409,091)
Forfeited 1
December 2010 - (112,363) - -
Forfeited 11
December 2010 - - - (409,091)
---------------- ------------- ------------- --------------- -------------
At 26 December
2010 1,191,260 2,775,372 21,008,334 2,104,887
---------------- ------------- ------------- --------------- -------------
The total number of options which would be issued at the end of
the term of the SAYE share option scheme, assuming no further
leavers, would be 3,966,632 shares. The exercise price relating to
these options is presented in the table above. The share options
outstanding at 26 December 2010 had a remaining average contractual
life of 2.5 years. The share-based payment charge recognised in the
period is as follows:
SAYE Scheme SAYE Scheme
(3 year (5 year Unapproved Approved
term) term) EMI Scheme EMI Scheme Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 27
December
2009 - - - 116 116
------------ ------------ ------------ ------------ ------------ --------
At 26
December
2010 5 7 17 41 70
------------ ------------ ------------ ------------ ------------ --------
25. Contingent liabilities and contingent assets
As at 26 December 2010, the Group had received GBP12.3 million
(including interest) from HMRC in relation to VAT previously paid
on mechanised cash bingo, main stage bingo and gaming machines
following the High Court's decision on the Rank case.
The receipt of GBP12.3 million is split between monies due to
Thomas Holdings Limited (in its capacity as VAT group
representative member) for the period prior to August 2006, and
monies due to the previous shareholders of Beacon Entertainments
Limited for the period after August 2006 to 20 April 2010. These
receipts have not been booked in profit or loss.
The receipts relating to the period prior to August 2006 are
payable to the previous shareholders of Thomas Estates Limited
(including Simon Thomas, a Non-executive Director of the Company,
and his family) in accordance with the Sale and Purchase Agreement
dated August 2006 and the Deed of Variation dated January 2010. Any
payments made under the Sale and Purchase Agreement or the Deed of
Variation are to be treated as deferred consideration for the
investment made by a member of the Group, Mayfair Acquisitionco
Limited, in Thomas Holdings Limited. The receipts relating to the
period post August 2006 to 20 April 2010 are to be paid to the
previous shareholders of Beacon Entertainments Limited in
accordance with the Sale and Purchase Agreement dated 20 April
2010. As at 26 December 2010, GBP9.7 million had been received in
respect of VAT claims relating to the period prior to August 2006,
and this amount is payable to the previous shareholders, the Thomas
family, net of corporation tax.
There is currently uncertainty surrounding the assessment of the
income to corporation tax, so any potential tax liability due on
the income is being held in escrow.
25. Contingent liabilities and contingent assets (continued)
During the 52 weeks ended 26 December 2010, GBP6.8 million has
been paid to the Thomas family, which represented the majority of
the receipts to date less corporation tax at 28%. A further amount
of GBP1.1 million is payable to the Thomas family in respect of the
amounts received net of corporation tax. In addition, GBP1.8
million relating to the potential corporation tax liability was
held by the Group at the reporting date and this is payable into
the aforementioned escrow account.
The Group has also received GBP2.6 million of VAT relating to
claims for the period post August 2006 and this amount was repaid
to HMRC during the period pending the conclusion of HMRC's appeal
of the Rank case. As noted, these amounts are payable to the
previous shareholders of Beacon Entertainments Limited. These
amounts will become finally payable once HMRC have lost the right
of appeal in respect of the VAT reclaims.
HMRC have informed the Group that they are to issue protective
assessments on all of the refunds received by the Group, in
accordance with their intention to appeal against the Rank decision
in every available court.
The Directors confirm that the VAT reclaims have not been
recognised as income in the accounts as at 26 December 2010, and no
future VAT receipts that have been agreed with HMRC have been
accrued as they are contingent assets, given the level of
uncertainty involved.
At 26 December 2010 there are future potential receipts of
GBP4.7 million in respect of other VAT reclaim amounts due to be
paid to the Thomas family and GBP3.6 million (in addition to the
GBP2.6 million previously received but repaid to HMRC in the
period) in respect of other VAT reclaim amounts due to the previous
shareholders of Beacon Entertainments Limited. These also have not
been recognised in these accounts.
26. Events after the reporting date
On 31 January 2011, the Group acquired 14 operating AGCs for a
total consideration of GBP2.3 million (excluding deal costs of
GBP0.1 million) settled in cash, from various members of the Noble
Organisation, which is one of the UK's leading gaming operators.
The consideration was funded through the issue of 28,535,981
ordinary shares at a price of 8.06 pence per share to Falcombe
Holdings Limited, a company connected to the rest of Noble by
common ownership. The review of the fair value of the assets
acquired is currently being undertaken and provisional fair values,
where appropriate, will be reflected in the Group's interim results
for 2011.
On 25 February 2011, the Group was awarded an exclusive
management contract for 75 operating AGCs located throughout the UK
for an initial period of 12 months. Additionally the Group has
entered in to an exclusivity agreement under which it is the
intention to agree an option for Praesepe to acquire 100% of these
operating AGCs at a date to be agreed during the period between 25
May 2011 and 24 February 2012.
On 8 April 2011, the Company announced that it had received an
indicative offer from Marwyn Management Partners plc ("MMP"), a
company related to the Marwyn group of companies (see note 22) in
connection with a possible all share offer for the entire issued
share capital of the Company. The possible offer values each
ordinary share of the Company at 7.5 pence based on a price of 100
pence per MMP share. The Company has formed an independent
committee of the Board comprising Blair Sinton, Brian Mattingley
and Simon Thomas to evaluate the merits of the possible offer. The
Company announced on 3 June 2011 that MMP had made a formal offer
for the Company at a price of 8.0 pence per share based upon the
closing price of MMP shares on 2 June 2011 and that MMP had
received irrevocable acceptances in respect of at least 51% of the
issued share capital. The acquisition of the Company under the
terms of the offer is expected to become wholly unconditional by 17
June 2011.
As a result of the offer becoming wholly unconditional, MMP will
invest GBP3.0 million into Praesepe to provide the Company with the
capital required to meet its bank debt repayment, due on 17 June
2011, and provide additional working capital for the business.
GBP2.35 million of bank debt due for repayment on 20 April 2011 was
rescheduled for repayment on 17 June 2011.
It should be noted that as a result of the acquisition of the
Company under the terms of the MMP offer after the reporting date,
the convertible loan notes which originated in 2009 will be
converted into approximately 85.7 million ordinary shares
(accordingly the liability of GBP6,925,000 will be extinguished,
the shares issued will be recorded in equity and the deferred tax
liability of GBP111,000, which arose on the previous equity element
of the convertible loan notes, will be released through reserves in
the forthcoming period ended 25 December 2011); the deferred
consideration shares, which arose on the acquisition of Beacon
Entertainments Limited will no longer be issued (accordingly the
balance in equity of GBP131,000 will be adjusted against the
goodwill in the forthcoming period ended 25 December 2011); and the
options under the Company's share option schemes will vest
immediately resulting in an accelerated IFRS 2 share-based payments
charge of GBP224,000 being recognised in the accounts in the
forthcoming period ended 25 December 2011 and 713,975 ordinary
shares will be issued under the SAYE share option scheme.
Company Balance Sheet
As at 26 December 2010
26 December 27 December
2010 2009
Notes GBP'000 GBP'000
------------------------------------------ ------ ------------ ------------
Fixed assets
Fixed asset investments - Group
undertakings 5 28,197 27,232
Premiums on operating leases 3 330 381
Tangible fixed assets 4 159 123
------------------------------------------ ------ ------------ ------------
28,686 27,736
------------------------------------------ ------ ------------ ------------
Current assets
Amounts owed by subsidiary undertakings 12,895 11,313
Prepayments and accrued income 6 90 613
Cash at bank and in hand 7 - 1,047
------------------------------------------ ------ ------------ ------------
12,985 12,973
------------------------------------------ ------ ------------ ------------
Creditors: amounts falling due within one
year
Trade and other creditors 8 (880) (1,172)
Loans 9 - (3,750)
------------------------------------------ ------ ------------ ------------
Net current assets 12,105 8,051
------------------------------------------ ------ ------------ ------------
Total assets less current liabilities 40,791 35,787
------------------------------------------ ------ ------------ ------------
Creditors: amounts falling due after more
than one year 9 (7,310) (6,637)
------------------------------------------ ------ ------------ ------------
Net assets 33,481 29,150
------------------------------------------ ------ ------------ ------------
Capital and reserves
Share capital 10 23,578 22,011
Share premium 11 18,724 12,984
Merger reserve 11 4,116 -
Share-based payments reserve 11 238 168
Retained losses 11 (13,175) (6,013)
------------------------------------------ ------ ------------ ------------
33,481 29,150
------------------------------------------ ------ ------------ ------------
Company registered number - 05745526
Notes to the Company balance sheet
For the 52 weeks ended 26 December 2010
1. Accounting Policies The financial statements of the Company
have been prepared under the historical cost convention and in
accordance with applicable United Kingdom Accounting Standards. The
Company has not presented a cash flow statement on the basis that
its cash flows are included in the consolidated statement of cash
flow.
The Company has taken advantage of Section 408 of the Companies
Act 2006 and has not included a profit and loss account in these
financial statements. The Company's loss for the year is given in
note 11 to these financial statements.
a) Accounting convention The financial statements are prepared
under the historical cost convention.
b) Going concern The Directors have adopted the going concern
basis in the preparation of the company financial statements on the
basis that MMP will invest GBP3.0 million into the company
following the offer, as detailed in note 26 to the consolidated
financial statements, for Praesepe being declared unconditional on
or before 17 June 2011. This will provide the company and its
subsidiaries with the capital required to meet their bank debt
repayment schedule, which was revised as detailed in note 26 to the
consolidated financial statements, and funds for additional working
capital.
Based on the terms of the offer and the level of irrevocable
acceptances already received by MMP, the directors are of the
opinion that the MMP offer will be declared unconditional before 17
June 2011.
Accordingly, the company financial statements are presented on
the going concern basis and do not include any adjustments that
would result if the company was unable to continue as a going
concern.
c) Fixed assets and depreciation Fixed assets are stated at cost
less accumulated depreciation.Depreciation is calculated to write
off the cost of fixed assets on a straight line basis over their
estimated useful lives as follows:
-- Fixtures and fittings - between 25% and 33% per annum
d) Deferred taxation Deferred tax is provided in respect of the
tax effect of all timing differences that have originated but not
reversed at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying
timing differences can be deducted.
Deferred tax is measured on a non-discounted basis at the
average tax rates that are expected to apply in the periods in
which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date.
e) Investments Investments held as fixed assets are stated at
cost less provision for any permanent diminution in value. Where
investments are acquired through a share for share exchange they
are recorded at the fair value of the consideration shares. In
accordance with the Companies Act 2006 merger relief is applied and
a merger reserve created for the difference between the nominal and
fair value of the consideration shares.
f) Premiums on operating leases Premiums on operating leases
relating to business acquisitions are stated at historical cost
less accumulated amortisation. Amortisation is charged on a
straight line basis over the term of the lease. Lease terms range
between two and 20 years.
g) Pension costs and other post-retirement benefits The Company
operates a defined contribution scheme for certain employees. The
costs of the pension funding borne by the Company are charged to
the profit and loss account as an expense as they fall due.
h) Share-based payments The Company reflects the economic cost
of awarding shares and share options to employees by recording an
expense in the profit and loss account equal to the fair value of
the benefit awarded, fair value being determined by reference to
option pricing models. The expense is recognised in the profit and
loss account over the vesting period of the award.
There are four share-based payment plans in place:
-- Management Participation Shares;
-- Marwyn Participation Option;
h) Share-based payments (continued)
-- Employee Incentive Scheme; and
-- Save As You Earn Scheme. Refer to note 24 of the consolidated
financial statements for further details.
i) Operating leases Rentals payable under operating leases are
charged on a straight line basis over the term of the lease.
j) Related party transactions The Company has taken advantage of
the FRS 8 exemption from providing information about transactions
entered into by Group companies as all subsidiaries are
wholly-owned by the Company.
2. Company loss The Company's loss for the period is
GBP7,041,000 (2009: loss of GBP1,513,000).
3. Premiums on operating leases
Total
GBP'000
Cost or valuation
At 27 December 2009 454
Additions -
----------------------- --------
At 26 December 2010 454
----------------------- --------
Amortisation
At 27 December 2009 73
Charge for the period 51
----------------------- --------
At 26 December 2010 124
----------------------- --------
Net book value
At 26 December 2010 330
----------------------- --------
At 27 December 2009 381
----------------------- --------
During 2008 and 2009, Praesepe plc acquired several operating
leases for AGC sites, which are to be rebranded as Cashino sites
and integrated with the trading subsidiaries. Amortisation has been
provided over the terms of the leases.
4. Tangible fixed assets
Fixtures
and
fittings Total
GBP'000 GBP'000
------------------------------------ --------- --------
Cost
At 1 January 2009 120 120
Additions 107 107
------------------------------------ --------- --------
At 27 December 2009 227 227
Additions 110 110
------------------------------------ --------- --------
At 26 December 2010 337 337
------------------------------------ --------- --------
Depreciation
At 1 January 2009 48 48
Depreciation charge for the period 56 56
------------------------------------ --------- --------
At 27 December 2009 104 104
Depreciation charge for the period 74 74
------------------------------------ --------- --------
At 26 December 2010 178 178
------------------------------------ --------- --------
Net book value
At 26 December 2010 159 159
------------------------------------ --------- --------
At 27 December 2009 123 123
------------------------------------ --------- --------
5. Fixed asset investments - Group undertakings
Total
GBP'000
---------------------------------------------------------------- --------
Shares in subsidiary undertakings
At 27 December 2009 21,364
Additions 5,022
Impairment charge during the period (4,113)
---------------------------------------------------------------- --------
At 26 December 2010 22,273
---------------------------------------------------------------- --------
Share options available to subsidiary undertakings
At 27 December 2009 124
Share-based payments charge on share options made available to
employees of subsidiary undertakings 56
---------------------------------------------------------------- --------
At 26 December 2010 180
---------------------------------------------------------------- --------
Loans to subsidiary undertakings
At 27 December 2009 5,744
Additions -
---------------------------------------------------------------- --------
At 26 December 2010 5,744
---------------------------------------------------------------- --------
Total fixed asset investments as at 26 December 2010 28,197
---------------------------------------------------------------- --------
Total fixed asset investments as at 27 December 2009 27,232
---------------------------------------------------------------- --------
Investments in subsidiary undertakings are recorded at cost less
provision for any permanent diminution in value.
Following the impairment review performed on the Group's
goodwill (as set out in note 9 to the consolidated financial
statements), where it was concluded that the Group's goodwill was
impaired, the value of the Company's investments has been assessed
with a resulting reduction in value of GBP4,113,000. The Company's
indirectly held investments in Cashino Gaming Limited and Cashino
Gaming (E&J) Limited are considered to be impaired by this
amount. The Company's directly held investment in Praesepe (UK)
Limited, which with Praesepe Gaming Limited, are intermediate
holding companies for these indirectly held investments are
resultantly also considered to be impaired by this amount.
The principal subsidiaries of the Company are:
Proportion
Country of of ownership
Company incorporation interest Nature of business
------------------------ -------------- ------------- ---------------------
Praesepe (UK) Limited England and 100% Intermediate holding
Wales company
Praesepe Gaming Limited England and 100% Intermediate holding
Wales company
Mayfair Acquisitionco England and 100% Intermediate holding
Limited Wales company
Cashino Gaming Limited England and 100% AGC operator
Wales
Cashino Gaming (E&J) England and 100% AGC operator
Limited Wales
Thomas Estates Limited England and 100% Bingo club and
Wales AGC operator
United Leisure Limited England and 100% AGC operator
Wales
------------------------ -------------- ------------- ---------------------
6. Prepayments and accrued income
As at As at
26
December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------------------------- ---------- ------------
VAT debtor 72 83
Prepayments and accrued income 12 50
Other debtors 6 11
Prepaid costs relating to future business
combinations - 469
---------------------------------------------------- ---------- ------------
90 613
---------------------------------------------------- ---------- ------------
7. Cash at bank and in hand
As at As at
26
December 27 December
2010 2009
GBP'000 GBP'000
-------------------------- ---------- ------------
Cash at bank and in hand - 1,047
-------------------------- ---------- ------------
Cash at bank earns interest at floating rates based on bank
deposit rates. Short-term deposits are made for varying periods
dependent on the immediate cash requirements of the Group.
8. Trade and other creditors
As at As at
26
December 27 December
2010 2009
GBP'000 GBP'000
--------------------------------- ---------- ------------
Trade creditors 627 867
Social security and other taxes 18 20
Accruals and deferred income 235 285
--------------------------------- ---------- ------------
880 1,172
--------------------------------- ---------- ------------
Trade and other creditors are non-interest bearing and it is the
Company's policy to pay within the stated terms or other period as
agreed with the supplier.
9. Loans
As at As at
26
December 27 December
2010 2009
GBP'000 GBP'000
---------------------------------------------------- ---------- ------------
At start of the period 10,387 3,674
Issued to fund acquisition - 6,500
Loan interest accrued 673 137
Repayment of loan facilities (3,750) -
Amortisation of cost of raising finance during the
period - 76
---------------------------------------------------- ---------- ------------
At the end of the period 7,310 10,387
---------------------------------------------------- ---------- ------------
As at As at
26 December 27 December
2010 2009
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Falling due within one year - 3,750
Falling due after more than one year 7,310 6,637
-------------------------------------- ------------ ------------
7,310 10,387
-------------------------------------- ------------ ------------
Details of the repayment terms, interest and security relating
to these loans are provided in notes 17 and 19 to the consolidated
financial statements.
10. Authorised and issued share capital
As at As at
26 December 27 December
2010 2009
------------------------------------------------ ------------- -------------
Authorised
Ordinary shares of 1 pence each (2009: 10 pence
each):
- number 400,000,000 400,000,000
- nominal value (GBP) 4,000,000 40,000,000
------------------------------------------------ ------------- -------------
Deferred ordinary shares of 9 pence each:
- number 400,000,000 -
- nominal value (GBP) 36,000,000 -
------------------------------------------------ ------------- -------------
Total nominal value authorised (GBP) 40,000,000 40,000,000
------------------------------------------------ ------------- -------------
Issued, called up and fully paid
Ordinary shares of 1 pence each (2009: 10 pence
each):
- number 376,780,305 220,113,638
- nominal value (GBP) 3,767,803 22,011,364
------------------------------------------------ ------------- -------------
Deferred ordinary shares of 9 pence each:
- number 220,113,638 -
- nominal value (GBP) 19,810,227 -
------------------------------------------------ ------------- -------------
Total nominal value issued (GBP) 23,578,030 22,011,364
------------------------------------------------ ------------- -------------
The movement in the Company's issued share capital during the 52
weeks ended 26 December 2010 is set out in the table in note 11 and
is summarised below.
10. Authorised and issued share capital (continued)
On 2 March 2009, the Company placed 51,000,000 ordinary shares
of 10 pence each at a placing price of 10 pence per share to raise
GBP5.1 million.
On 1 March 2010 the share capital of the Company was reorganised
by subdividing each existing ordinary share of 10 pence into one
new ordinary share of 1 pence and one deferred share of 9 pence.
The new ordinary shares have the same rights (including voting and
dividend rights) as each previously issued ordinary share had. The
rights attaching to the deferred shares can be summarised as
follows:
-- they do not entitle holders to receive any dividend or other
distribution or to receive notice or speak or vote at general
meetings of the Company;
-- on a return of assets on a winding up, they only entitle the
holder to the amounts paid up on such shares after the repayment of
GBP10 million per new ordinary share;
-- they are not freely transferable;
-- the creation and issue of further shares which rank equally
or in priority to the deferred shares or the passing of a
resolution of the Company to cancel the deferred shares or to
effect a reduction of capital shall not constitute a modification
or abrogation of their rights; and
-- the Company shall have the right at any time to purchase all
of the deferred shares for an aggregate consideration of
GBP1.00.
The Company announced on 2 March 2010 that the shareholders had
approved the necessary resolutions to grant conversion rights to
the loan notes, which are now convertible to ordinary shares at a
conversion price of 9.0 pence per share. In addition on 30 March
2010, the Company completed the placing of 80,000,000 ordinary
shares of 1 pence each at a placing price of 7.5 pence per share to
raise GBP6.0 million before expenses.
On 20 April 2010 the Group completed the acquisition of Beacon
Entertainments Limited for GBP5.0 million (excluding fees) payable
by a combination of 63,333,334 ordinary shares to the vendors at a
price of 7.5 pence per share and GBP272,500 in cash. Subject to the
fulfilment of certain conditions, the vendors may also receive up
to 28,500,000 additional ordinary shares. The Group assumed GBP40.0
million in secured bank debt as a part of that acquisition.
On 20 September 2010, the Group acquired eight operating AGCs
for a purchase consideration of GBP1.0 million (excluding fees)
payable in cash, which was funded through the issue of 13,333,333
ordinary shares at a price of 7.5 pence per share.
The directly attributable costs of the three share issues
summarised above of GBP448,000 have been charged to reserves (see
note 11).
11. Reconciliation of movements in shareholders' funds
Share-based
Share Share Merger payments Retained
Capital premium reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- -------- ------------ --------- --------
At 1 January
2009 16,911 13,297 - 52 (4,500) 25,760
Share issue
2 March
2009 5,100 - - - - 5,100
Costs
relating to
shares
issued - (313) - - - (313)
Share-based
payments
charge - - - 116 - 116
Loss for the
period - - - - (1,513) (1,513)
------------- -------- -------- -------- ------------ --------- --------
At 27
December
2009 22,011 12,984 - 168 (6,013) 29,150
Share issue
30 March
2010 800 5,200 - - - 6,000
Share issue
20 April
2010 634 - 4,116 - - 4,750
Share issue
20
September
2010 133 867 - - - 1,000
Costs
relating to
shares
issued - (327) - - (121) (448)
Share-based
payments
charge - - - 70 - 70
Loss for the
period - - - - (7,041) (7,041)
------------- -------- -------- -------- ------------ --------- --------
At 26
December
2010 23,578 18,724 4,116 238 (13,175) 33,481
------------- -------- -------- -------- ------------ --------- --------
The merger reserve arises following the acquisition of the
Beacon group of companies as set out in note 9 to the consolidated
financial statements. The consideration included a share for share
exchange at a premium, in accordance with Companies Act
11. Reconciliation of movements in shareholders' funds
(continued)
2006 a share premium has not been recognised in respect of this
transaction. The investment has been recorded at the fair value of
the shares issued rather than at their nominal value and
accordingly a merger reserve has been recognised for the difference
between the nominal and fair value of the shares. 12.
Commitments
At 26 December 2010 the Company was committed to making the
following payments under non-cancellable operating leases in the
next financial year:
52 weeks ended Period ended
26 December 27 December
2010 2009
Land Land
& buildings Other & buildings Other
GBP'000 GBP'000 GBP'000 GBP'000
Expiry date
Within one year - - - -
After one year but not more
than five years 14 3 14 3
After five years 13 - 13 -
---------------------------- ------------- -------- ------------- --------
27 3 27 3
---------------------------- ------------- -------- ------------- --------
13. Share-based payment and long-term incentive plans Details of
the Company's share-based payment and long-term incentive plans are
disclosed in note 24 of the consolidated financial statements. 14.
Post balance sheet events Details of post balance sheet events are
disclosed in note 26 of the consolidated financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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