RNS Number:5224J
Arena Leisure PLC
02 April 2003
2 April 2003
ARENA LEISURE PLC ("ARENA")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Highlights
Results
* Group turnover increased by 23% to #32.7m (2001: #26.6m)
* Group EBITDA increased by #5.8m (2001: Nil)
* Operating profit of #4.0m, an increase of #5.8m (2001: loss of #1.8m)
* Share of losses from attheraces joint venture in line with plan at #11.1m
(2001: #3.9m)
* Pre-tax loss for the group of #6.9m, in line with plan (2001: #6.2m)
* Loss per ordinary share of 1.91p (2001: loss of 1.95p)
Operating achievements
* Bookmaking deal in May 2002 will result in additional revenues of #4.0m
per annum
* Racecourses operations have shown record profits and prize money levels
* Partnership with Gala Group announced today to develop the UK's first
on-track casino at Wolverhampton racecourse
* Redevelopment studies underway for both Royal Windsor and Lingfield Park
racecourses
* Arena's technology division performing well with integration of telephone
betting, American racing and interactive television projects
attheraces
* Successfully launched attheraces digital television channel in May 2002 on
Sky channel 418 with interactive betting service launched in October 2002
* Additional carriage deal secured with ntl in November 2002, and since year
end a further carriage deal secured with Telewest Broadband in March 2003
* Breeders' Cup Championships marked the launch of North American racing on
attheraces (October 2002) with betting now available
* Media rights management contributed #17.1m to attheraces
* attheraces is now broadcast overseas to numerous bookmakers in Europe, Sri
Lanka and the Caribbean
Ian Penrose, Arena's Group Managing Director, said today:
"This has been another significant year for Arena Leisure and we are seeing the
benefits of our investments and major strategic partnerships. It has been an
excellent year for our racecourse operations and we have remained the UK's
busiest independent racecourse operator. We will also be the first UK racecourse
to operate its own casino - or 'Racino' - in conjunction with Gala Group. This
is an excellent and ground breaking deal for both parties. attheraces betting
and media platforms are now well established and performing in line with our
plan. Furthermore we look forward to the imminent announcement from the Office
of Fair Trading regarding the structure of the racing industry and believe that
we are well placed to take advantage of any forthcoming changes to the sport."
- ENDS -
For further information please contact:
Ian Penrose, Group Managing Director
Arena Leisure Plc Tel: 020 7495 2277
Nick Davis, Director of Communications
Arena Leisure Plc Tel: 020 7495 2277
David Rydell/Emma Kent/Miles Bake
Bell Pottinger Financial Tel: 020 7861 3232
CHAIRMAN'S STATEMENT
Introduction
In my statement last year I outlined four key elements for our programme in
2002: to maximise potential from our current racecourse business; to exploit
maximum value from media rights purchased via our attheraces venture; to take
advantage of opportunities presented by the favourable Sir Alan Budd report into
gaming and, finally, in conjunction with Scientific Games Corporation of the
USA, our partners in 'Trackplay', to continue to look for additional customers
for our unique gaming technology. I am delighted that we have achieved
significant progress on our goals in all four areas.
Financial results
The group continues to perform well. Overall the group's financial performance
was excellent for this stage of our development. Turnover for the twelve months
ended 31 December 2002 was up by 23% to #32.7m (2001: #26.6m). EBITDA increased
to #5.8m (2001: #Nil). Equally, operating profit was #4.0m an increase of #5.8m
on the prior year (2001: loss of #1.8m). Our share of losses from the attheraces
joint venture was #11.1m resulting in a net pre tax loss for the group of #6.9m
which is in line with our plan (2001: loss of #6.2m). Loss per ordinary share
was 1.91p (2001: loss of 1.95p).
Racecourse operations
In 2002 one of our stated goals was to further develop our racecourse business.
I am pleased to report that an additional boost to profitability was achieved in
May last year through a new agreement reached between our racecourses and
bookmakers to show live racing in betting shops for a fixed payment of #4,000
per race. This arrangement will result in additional revenues of #4.0m per year
for our racing product, as we stage over 1,500 races per year at our six
racecourses. Arena awarded record prize money in the year of #8.5m and also
invested in enhancing facilities across our portfolio of tracks. We continue to
be the largest independent racecourse owner in terms of fixtures in 2003, with
attendance and corporate bookings already showing signs of beating last years
record levels.
attheraces
Last year I stated that, together with our partners BSkyB and Channel 4, we
would continue to exploit the media rights purchased by attheraces, starting
with the scheduled launch of the attheraces digital television channel on Sky
channel 418 in May 2002. Our technology division then continued to work with
engineers from Sky to launch a fully interactive betting service at the end of
October. This is recognised as one of the leading digital betting services in
the world and we have been encouraged by the viewing figures and take-up of the
service to date.
October also saw the start of a nightly import of live US horseracing to the
attheraces channel and the availability of betting on US horseracing via the
internet on attheraces.co.uk. This has now been supplemented by interactive
television betting, which is the first time UK viewers have been able to bet
directly into the wagering pools in North America via their television set.
Since the launch of the attheraces television channel on Sky, attheraces has
secured carriage deals with ntl and Telewest in November 2002 and March 2003
respectively. The attheraces channel is now received in over 8.5 million homes
and both cable channels will also have full interactive betting services in the
near future.
Whilst the pioneering interactive betting service was launched towards the end
of the financial year, the media rights management business - consisting of the
on-selling of the UK horseracing rights attheraces acquired - matched our
expectations. As a result attheraces performance remained in line with our plan
for this early period of its development and we are now in a position to fully
exploit the media rights acquired through future broadcast and betting
activities.
Future gaming opportunities
In 2002 we have continued to position the business to exploit the opportunities
likely to be presented to Arena by the favourable Sir Alan Budd report into
gaming. These proposed changes are expected to be included in the Queen's Speech
in November 2003 and we anticipate new legislation being approved in the Winter
of 2004/5. Our racecourse and hotel complex in Wolverhampton is not conditional
upon this new legislation and I am delighted to announce today that we have
secured an arrangement with Gala Group to develop the UK's first racecourse
casino. Other research has been focused into re-developing Royal Windsor
racecourse and we have commissioned architects and planning experts to evaluate
the potential for wider leisure and gaming facilities at this location.
Gaming technology
In conjunction with Scientific Games Corporation of the USA, our partners in '
Trackplay', I stated that we would continue to look for additional customers for
our unique gaming technology last year. In 2002, Arena, via Trackplay, reached
an agreement to develop an interactive internet gaming system for use by
Fintoto, the leading Finnish horseracing pari-mutuel betting company. Trackplay
continues to investigate further opportunities as the global gaming market
continues to evolve.
Dividend
Arena remains focused on developing its strategic position within the
horseracing, media rights and gaming industries. Your Board does not propose to
pay a dividend for this financial period and will continue to reinvest in the
medium term growth of the business.
Employees
Arena's achievements have only been possible by the expertise and hard work of
all its employees. I would therefore like to record the Board's appreciation of
each individual's contribution during 2002 and to date.
Outlook
The company continues to build upon its solid foundations.
As we embark on a new financial year, our racecourses are trading well. The
racing industry is poised to embark upon a new era when the Office of Fair
Trading ('OFT') reports on its findings following a two year review. As
previously stated, we welcome initiatives which will provide for greater
competition and customer focus. We anticipate beneficial consequences for our
racecourses, attheraces and the Tote, and will make announcements at the
appropriate time.
attheraces now has a variety of betting platforms and distribution channels in
place to fully exploit the racing rights acquired. Technical developments and
international rights negotiations underway will bring further betting and media
rights revenues.
Our aims for the longer-term success of the company remain undiminished, and I
look forward to the future with confidence. Arena is confident that our
divisions will continue to trade strongly and attheraces is expected to
breakeven in the second half of 2005.
We look forward to a successful 2003 for all areas of our operations.
Roger D Withers
Chairman
2 April 2003
GROUP MANAGING DIRECTOR'S REPORT
Racecourses
2002 has been an excellent year for our racecourse operations. I am delighted
with the overall performance and the progress made throughout a whole range of
areas. The year has witnessed record operating profits of #5.1m and record prize
money levels of #8.5m. We remained the UK's busiest independent racecourse
operator, staging 1,661 races in front of a total of 420,000 visitors. More
recently, to mark the culmination of the all-weather season, we held the most
valuable race meeting in all-weather history at Lingfield Park, followed by an
Awards Dinner in the evening to celebrate and reward the most successful
jockeys, trainers and stable staff, along with the most prolific winning owner
of the season. During the year we successfully transferred our catering
operation to Letheby and Christopher and we made great strides in our focus on
improving overall customer experience at our tracks.
All-weather surfaces: Lingfield Park, Wolverhampton and Southwell racecourses
Arena continues to take the sport of all-weather racing forward and remains the
UK's only operator of all-weather racecourses. We are delighted to be in a
position to provide guaranteed opportunities for the benefit of racegoers,
owners, trainers, jockeys, stable staff, bookmakers and media companies
throughout the winter at all three of our all-weather tracks.
In 2002 Lingfield Park enjoyed its highest level of corporate bookings in recent
years and also hosted the largest Derby Trial crowd since 1997. Demand for
horses to race on our surfaces is at record levels and continues to outstrip
available races.
On Saturday 15 March 2003 Arena staged the richest ever all-weather race meeting
in this country at Lingfield Park, with #231,000 in total prize money awarded on
the day, together with the most valuable race in all-weather history the #75,000
Spring Cup.
This meeting was followed on the same evening by our second all-weather
Championships Awards Dinner at which #80,000 was awarded in prize money to
winning jockeys, trainers, stable staff and owners. The Awards Dinner was held
in the main Pavilion hospitality area at Lingfield Park which has recently
benefited from a major investment to improve this splendid facility. We expect
to secure additional corporate race-day and non-race day bookings as a result
over the coming year.
In addition to receiving continued widespread acclaim from all sectors of the
racing community for what is now recognised as one of the best racing surfaces
in the world at Lingfield Park, we have also progressed work on the detailed
studies associated with the redevelopment of spectator and leisure facilities
commensurate with the quality of the racing and location of this racecourse.
The Surrey Open Golf Tournament was again successfully run at Lingfield Park
Golf Club with the event also programmed for 2003. To keep competitive in the
Lingfield area, the Golf clubhouse and 15th green have also been refurbished.
Wolverhampton racecourse was the group's busiest course in terms of fixtures in
2002, staging a total of 472 races (28% of the overall total staged at our
racecourses). We have commenced a total refurbishment and extension of the
Ringside Suite. Additionally, the on- site Holiday Inn hotel has undergone a
major refurbishment during 2002; occupancy levels are up 8% on 2001 and continue
to rise in the first quarter of 2003.
Southwell racecourse also had a busy year, staging 390 races. All training barns
at the racecourse are full and the three on-site trainers all saw success on the
all-weather surface. Ongoing racecourse refurbishment included the laying of new
tarmac on the pre-parade and parade rings and horse walks. The Golf Club now has
achieved a record membership level since we acquired the racecourse and Golf
Club in 1999.
We are delighted that our innovative, eight hundred race sponsorship agreement
with Littlewoods Bet Direct continues to be a success for both parties.
Royal Windsor, Worcester and Folkestone racecourses
We were pleased to record a 14% growth in attendance in 2002 compared to 2001 at
our three turf-only racecourses.
From April to August 2002 Royal Windsor staged fourteen Monday evening meetings
which continue to grow in popularity. We were pleased to see that our #1m
investment in a new bridge has significantly improved accessibility for
racegoers arriving by car or coach. The Gala Group enjoyed the first year of
their three-year sponsorship of the Royal Windsor Festival in May and we look
forward to repeating this successful event this year.
Prize money at Royal Windsor topped #1m for the first time last year. The Tote
Exacta series of 5 and 6 furlong Handicaps and Classified stakes were a
particular feature last season, with six races of #10,000 added and a final held
on 12 August with #20,000 added.
Although one of the smaller tracks in the Arena Leisure stable, Folkestone has
always maintained loyal support, and in 2002, following new marketing
initiatives, attendances over the year increased by 30%. The trend, it seems, is
set to continue, as annual membership levels for 2003 are 40% higher than a year
ago, while restaurant and corporate attendance bookings are also greatly
increased.
As a result of this growth we commenced a significant refurbishment programme at
Folkestone in January 2003, to improve the public areas, restaurants and
corporate facilities at the course.
Worcester racecourse added two fixtures as result of continued improvement in
the surface. 2003 hospitality and sponsorship bookings for the summer are
already ahead of 2002's total figures.
Racing industry developments
The significant development for our racecourse division in 2002 was the
agreement reached between our racecourses and Bookmakers' in May 2002 to show
live racing in betting shops for a fixed payment to courses of #4,000 per race.
For Arena this has led to an annualised #4.0m increase in revenue compared to
prior year.
At the time of writing we are still waiting to hear further details with regards
to the outcome of the wide ranging inquiry launched by the OFT into the
structure of the sport, and the role of the British Horseracing Board ('BHB')
within it. We would welcome initiatives that will facilitate a competitive and
commercial environment for all. We look forward to the OFT's announcement and
believe we are well positioned to take advantage of any changes, especially
those which will allow us to stage additional racing fixtures and race-days in
response to demand.
We also await the outcome of the Government's White Paper following the Sir Alan
Budd review, which is seeking to establish a more liberal regulatory framework
for gambling overall in the UK. This could allow Arena to develop casinos and
other gaming facilities at certain of our racecourses in addition to that
announced at Wolverhampton today. We anticipate that the matter will form part
of the Queen's Speech in November 2003 and we anticipate new legislation being
approved in the winter of 2004/5, by which stage we aim to be well advanced with
regards to racecourse redevelopments at certain of our tracks. Our announcement
of an agreement with Gala Group to develop a casino at Wolverhampton is not
conditional upon new legislation. Wolverhampton is already a permitted area for
casinos and, subject to planning considerations, we expect to open both the
casino and our enlarged hotel in Autumn 2004.
Media rights and technology
attheraces TV
On 1 May 2002 attheraces began broadcasting its new television channel on Sky
channel 418 free to six million homes across the UK through Sky's basic package.
attheraces received further TV exposure from October 2002 to March 2003 during
Channel 4's trial of a lunchtime programme. This daily, mid week half-hour show
gave attheraces and horseracing exposure to a new audience over the winter.
At the end of October 2002 attheraces launched a pioneering interactive betting
service on its Sky channel so that over six million viewers could then place a
bet with attheraces via their remote control handset, as well as through the
attheraces website and telephone betting offerings. This made attheraces the
UK's first interactive-betting television channel dedicated to horseracing. The
second release, due to be launched this quarter, will include fixed odds prices
- provided by Ladbrokes, Sky Bet and Bet Direct - and all 'exotic' Tote bets -
Jackpot, Placepot and Scoop 6.
On 26 October 2002 attheraces launched a North American racing broadcast service
on its Sky channel, which commenced with the Breeders' Cup World Thoroughbred
Championships. attheraces broadcast top racing action from the United States
every evening, averaging over 50 races per week from premier meetings. Betting
via the attheraces website has been available for American racing since November
2002 and from the viewer's Sky handset since February 2003.
The coverage of attheraces was increased further by a carriage deal with ntl in
November which brought the channel into an additional 1.25 million digital cable
homes. This was increased by a similar arrangement with Telewest Broadband in
March this year which has added 830,000 new homes, making a total broadcast
audience for attheraces' daily horseracing and betting of 8.5 million homes.
When the Racing Channel ceased broadcasting in January 2003, attheraces became
the only dedicated horseracing channel in the UK.
With regards to audience figures, take-up from initial launch in May has been
very encouraging for a new sports channel, achieving an average weekly
cumulative reach (the number of individuals who viewed attheraces for at least
three minutes during a week) of 539,000 from May until the end of the year.
On 26 October 2002 151,000 viewers watched the Rock of Gibraltar compete in the
Breeders Cup with over 376,622 total viewers that day - our record number of
viewers. On Saturday 8 March 2003, over 333,000 viewers tuned in to watch the
build-up for the Cheltenham festival with 182,000 viewers, our record number at
any one time to date, watching racing at 4.30pm on Wednesday during the
Festival.
We are delighted that on Saturday April 5 2003, working in conjunction with BBC
and BBC Worldwide, the Grand National is expected to be watched by 600 million
people and attheraces will be taking bets on the internet, telephone and on Sky
channel 418.
attheraces betting
We were pleased to see steady and continued growth in registrations across all
platforms in 2002 and ended the year with a total of 68,000 subscribers.
In June 2002 attheraces also launched a dedicated telephone betting service on
0800 083 83 83 which has seen steady growth and now offers fixed odds as well as
pari-mutuel ('Tote') betting.
Revenue from betting in our first full year of operating was behind our
expectations as a consequence of the launch of our pioneering interactive
betting service on Sky coming towards the end of the financial year, and after
the UK's major race meetings were over.
Total betting turnover in 2002 was #4.9m. Average bet sizes across all platforms
increased from #7.31 in the first quarter to #9.65 in the final quarter of 2002.
attheraces is expected to achieve the same betting turnover in the first 16
weeks of 2003 that it achieved for the whole of 2002. Betting turnover in March
2003 was nine times higher than in March 2002.
Channel 4 recently announced a 25% increase in viewing figures for its Morning
Line and Channel 4 attheraces programmes and Sky recently announced that the
total volume of bets placed via its viewer's set-top boxes was up 160% compared
to the previous year. With the launch of interactive betting on Channel 4 due
this quarter, fixed odds betting on attheraces Sky channel 418 also due this
quarter and interactive betting on both ntl and Telewest later this year, we
remain confident of continued strong growth in betting levels.
attheraces media sales
During 2002 BSkyB and Channel 4 re-titled their own racing coverage as Sky
attheraces and Channel 4 attheraces. The BBC broadcast from several racecourses,
including the Grand National, the Derby and Royal Ascot, having bought the
rights from attheraces.
In terms of exploiting attheraces media rights, we are pleased to report that
attheraces is now being broadcast live to overseas bookmakers in Belgium,
Holland, Germany, Italy, Sri Lanka and the Caribbean through an arrangement with
Satellite Information Services ('SIS'). Further archive broadcasts are being
made in other territories around the world. Other deals were progressed in 2002
with BBC Worldwide, Radio 5 Live, Talk Sport, premium rate telephone operators
and advertisers.
In total the rights management side of attheraces contributed #17.1m to turnover
during 2002, and is expected to grow strongly in 2003.
These transactions continue to reflect the powerful commercial value of the
media rights acquired by attheraces and demonstrate the attraction of
international audiences to UK horseracing and gaming.
We look forward to announcing international media right deals in the near
future, certain of which will also include reciprocal arrangements to enhance
the racing content on our current channel.
Technology - Arena Online Services
Our technology division continues to have an important role to play on behalf of
its key customer attheraces, playing a major role in the development of our
pioneering interactive betting services. Other achievements during the year
included the integration of telephone betting, American racing and internet
links with attheraces' three fixed odds bookmakers.
Turnover was up 107% for the year at #7.57m (2001: #3.65m) and operating profit
was #1.42m compared to a loss of #1.69 m the previous year.
As attheraces continues to upgrade its system to maintain market leadership,
Arena Online Services will benefit through the ongoing service agreement it has
in place with attheraces.
Trackplay
Our 30% Joint Venture with Scientific Games (known as 'Trackplay') delivered one
new customer in 2002 for our unique gaming software, namely Fintoto of Finland.
Revenues increased from our two previous Trackplay systems in operation in
California and Louisiana. In the year Arena's share of the associate's loss
reduced to #54,000 from a loss of #308,000 in the prior year. The potential
market for Trackplay systems remains encouraging and we continue to investigate
further opportunities as the global gaming market continues to evolve.
Racing into the future
Last year Arena began to see the benefits of its investments and major strategic
partnerships.
Looking ahead at our racecourse business, we remain focused on delivering a
first class customer experience. We are delighted to announce today a ground
breaking partnership with Gala Group at Wolverhampton racecourse where we intend
to open the UK's first on-track casino in 2004. Redevelopment studies continue
with regards to Royal Windsor and Lingfield Park racecourses and we expect to
announce further details later this year having completed extensive consultation
with local planning authorities and residents.
The outcome of the OFT's investigation into British racing is likely to bring
greater commercial freedom to your company and we look forward to working with
rest of the industry to ensure that the pre-eminent position of British racing
on the world stage is maintained. We also look forward to the publication of the
draft bill to enact the Budd recommendations which we confidently expect to be
in the Queen's Speech this year.
Our medium term aim for attheraces remains unchanged - to maximise revenues on
British horseracing using our racecourse, betting and media partners, both
domestically and internationally.
Significant achievements have been made in the last year, and your company is
well placed to benefit from the changes we expect to see in the following twelve
months.
Ian R Penrose
Group Managing Director
2 April 2003
Financial review
Results summary
The results of the group for the year to 31 December 2002 show an increase in
turnover of #6,071,000 (22.8%) to #32,675,000 (year to 31 December 2001:
#26,604,000). Operating profit increased to #4,044,000 as a result of
significant improvements from within both racing and gaming technology
divisions. This represents an improvement of #5,823,000 compared to the
operating loss of #1,779,000 reported for the year to 31 December 2001.
Loss on ordinary activities before and after tax for the year, including the
group's share of joint venture and associate results, was #6,887,000 (year to 31
December 2001: #6,171,000). Basic loss per share was 1.91 pence (year to 31
December 2001: loss 1.95 pence).
Highlights
* Group turnover up 23% to #32.7m
* Operating profit improved by #5.8m to #4.0m
* EBITDA increased by #5.8m
* Share of loss from attheraces joint venture in line with plan at #11.1m
* Loss on ordinary activities after tax #6.9m
* Bank borrowings reduced by #6.0m to #4.5m
Racecourse operations
Turnover from racecourse operations increased by #2,152,000 (9.4%) to
#25,106,000 (year to 31 December 2001: #22,954,000). Operating profit (excluding
group management charges) increased by #3,030,000 to #5,094,000 in the year to
31 December 2002 (year to 31 December 2001: #2,064,000). The results for 2002
reflect a #1,193,000 increase in total prize money paid to #8,479,000, and
benefit from an eight month contribution from the improved contract to provide
pictures into licensed betting shops in the UK. This added an additional
#2,341,000 to revenues in the year. Interactive media rights income of #941,000
was recognised in the profit and loss and reflects an increase of #471,000 over
2001. Contribution from catering operations increased significantly in the year
following the transfer of catering services to Letheby and Christopher in the
first quarter of 2002.
Technology (Arena Online Services)
Turnover from our gaming technology subsidiary increased by #3,919,000 (107%) to
#7,569,000 for the year to 31 December 2002 (year to 31 December 2001:
#3,650,000). Operating profit (excluding group management charges) improved by
#3,111,000 from an operating loss of #1,692,000 in 2001 to an operating profit
of #1,419,000 in the year to 31 December 2002. The technology business benefits
from a full year contribution in respect of its contract to provide technology
development and operational support for the attheraces media platforms. Revenues
in 2001 reflect only six months of this contract.
Group central costs
Group central costs of #2,469,000, including goodwill amortisation in respect of
our racecourse companies, have been controlled to the same level as last year,
after allowing for a one-off benefit in 2001 of #289,000 following the release
of a provision for national insurance on share options.
Media rights
During the year the group received interactive media rights payments from
attheraces (net of fees) of #2,789,000. The payments due to the group's
racecourses from attheraces over the ten year period of the rights agreement
incorporate an up front premium of #3,500,000 within the first full year, which
commenced on 1 July 2001. It is the group's policy to release this premium over
the ten year period, pro-rata to future scheduled payments. Income credited to
the profit and loss account in respect of interactive media rights during the
year was #941,000. Income deferred to future periods at 31 December 2002 was
#3,544,000.
Joint venture - attheraces
The group's share of the operating loss of its 33.3% joint venture attheraces
was #11,129,000 in the year to 31 December 2002 (year to 31 December 2001:
#3,944,000). The results for this period are in line with plan.
Associate - Trackplay
The group's share of the operating loss of its 30% associated company
'Trackplay' has been significantly reduced to #54,000 in the year to 31 December
2002 (year to 31 December 2001: #308,000).
Goodwill amortisation
Goodwill arising on consolidation in respect of the group's racecourse companies
is amortised over a period of 20 years, and in respect of the group's joint
venture attheraces, over a period of 10 years, in line with the term of the
media rights agreement. Goodwill amortisation in respect of the racecourse
companies was #308,000 for the year to 31 December 2002 (year to 31 December
2001: #307,000) and #226,000 in respect of the joint venture (year to 31
December 2001: #14,000).
Blocked bank deposit and loans to attheraces
During the year to 31 December 2002 the group has advanced loans of #28,550,000
to attheraces Holdings Ltd, of which #18,250,000 has been paid as part of a loan
agreement to fund the initial interactive media guarantee payments to
racecourses. A further #10,300,000 has been paid to fund Arena's share of the
working capital requirements of the company. At 31 December 2002 the group held
#10,500,000 on blocked deposit to fund future working capital requirements of
the business.
Treasury report
All bank borrowings and financial assets of the group are held in sterling and
on floating interest rates. In the current economic climate, and with the
group's evolving structure, hedging for interest rate risk is not considered
appropriate. However, the board constantly monitors the financial markets to
ensure this policy remains in the group's interest. The group does not face any
significant foreign currency risk. At 31 December 2002 the group had unutilised
bank facilities of #10,496,000 (31 December 2001: #4,479,000). Short-term
liquidity risk is managed by obtaining and reviewing the adequacy of banking
facilities. The group does not use derivative financial instruments to manage
risk.
Net bank borrowings reduced by #6,017,000 in the year to #4,504,000 at 31
December 2002. Bank borrowings consist of a #3,000,000 revolving credit loan and
a net bank overdraft of #1,504,000. Interest is charged on the bank overdraft at
1% over Bank of Scotland base rate. Interest on the revolving credit loan
facility is charged at either 1% over Bank of Scotland base rate or 1% over
LIBOR. The bank loan and overdraft are secured by a fixed and floating charge on
the assets and undertakings of the group companies, and a first legal charge on
all the freehold and leasehold properties owned by the group. This security is
subject to deeds of priority and permitted charges in favour of the Horserace
Betting Levy Board ("HBLB") in respect of security for interest free loans
provided to the group, whose loans to the group total #1,288,000 at 31 December
2002 (31 December 2000: #936,000).
Net debt at 31 December 2002 including HBLB loans (excluding blocked bank
deposit of #10,500,000) was #5,792,000 (31 December 2001: #11,457,000). This
represents gearing of 6.2% on net assets of #94,074,000 (31 December 2001: 11.4%
on net assets of #100,861,000).
Ian R Penrose
Group Managing Director
2 April 2003
Consolidated profit and loss account for the year ended 31 December 2002
Audited Audited
Year ended Year ended
31 December 31 December
2002 2001
as restated
Group Group
Note #000 #000
Total Turnover: Group and share of joint 39,528 29,869
venture
Less: Share of joint venture turnover (6,853) (3,265)
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Group Turnover 3 32,675 26,604
Cost of Sales (21,243) (20,654)
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Gross profit 11,432 5,950
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Administrative expenses (7,388) (7,729)
EBITDA 5,830 6
Depreciation (1,478) (1,478)
Amortisation (308) (307)
-------------- --------------
Operating profit/(loss) 4,044 (1,779)
Share of operating loss in
Joint venture (11,129) (3,944)
Associate (54) (308)
Goodwill amortisation in respect of joint (226) (14)
venture
-------------- --------------
Total operating loss: (7,365) (6,045)
Group and share of joint ventures and
associates
Interest receivable 1,185 1,295
Interest payable (707) (1,421)
-------------- --------------
Loss on ordinary activities before and after 1 (6,887) (6,171)
taxation
-------------- --------------
Pence Pence
-------------- --------------
Basic and diluted loss per share 2 (1.91) (1.95)
-------------- --------------
All recognised gains and losses are included above.
All amounts relate to continuing activities.
Balance sheet at 31 December 2002
Audited Audited Audited Audited
2002 2001 2002 2001
Group Group Company Company
Note #000 #000 #000 #000
Fixed assets
Intangible assets 5,186 5,494 - -
Tangible assets 54,824 54,531 57 120
Investments -in associate 360 325 - -
-other 345 345 48,419 48,144
----------- ----------- ----------- -----------
705 670 48,419 48,144
----------- ----------- ----------- -----------
60,715 60,695 48,476 48,264
----------- ----------- ----------- -----------
Current assets
Stock 41 146 - -
Debtors - due within one year 3,491 2,490 117 169
Debtors - due in more than one year 8 49,500 20,950 55,887 41,970
----------- ----------- ----------- -----------
52,991 23,440 56,004 42,139
Blocked Bank Deposit 8 10,500 39,050 10,500 39,050
Cash at bank and in hand 569 4,535 555 -
----------- ----------- ----------- -----------
11,069 43,585 11,055 39,050
----------- ----------- ----------- -----------
64,101 67,171 67,059 81,189
----------- ----------- ----------- -----------
Creditors: amounts falling due within one (10,974) (11,836) (4,862) (5,450)
year
Net current assets 53,127 55,335 62,197 75,739
----------- ----------- ----------- -----------
Total assets less current liabilities 113,842 116,030 110,673 124,003
----------- ----------- ----------- -----------
Creditors: amounts falling due after one
year
Share of gross assets of joint venture 14,670 7,061 - -
Share of gross liabilities of joint venture (29,733) (10,990)
----------- ----------- ----------- -----------
(15,063) (3,929)
Goodwill in respect of joint venture 2,019 2,245 - -
----------- ----------- ----------- -----------
(13,044) (1,684) - -
Other (6,724) (13,485) (3,000) (10,000)
----------- ----------- ----------- -----------
(19,768) (15,169) (3,000) (10,000)
----------- ----------- ----------- -----------
Net assets 94,074 100,861 107,673 114,003
----------- ----------- ----------- -----------
Capital & reserves
Called-up share capital 18,075 18,036 18,075 18,036
Share premium account 87,625 87,564 87,625 87,564
Merger reserve 5,417 5,417 5,417 5,417
Revaluation reserve 15 15 15 15
Special reserve 9 - 4,564 - 4,564
Profit & loss account 9 (17,058) (14,735) (3,459) (1,593)
----------- ----------- ----------- -----------
Shareholders' funds 94,074 100,861 107,673 114,003
----------- ----------- ----------- -----------
All amounts within shareholders' funds are equity.
Group cash flow statement for the year ended 31 December 2002
Audited Audited
Year ended Year ended
31 December 31 December
2002 2001
Note #000 #000
Net cash inflow from operating activities 4 6,904 1,434
Returns on investment and servicing of finance
Interest received 1,144 1,280
Interest paid (661) (1,420)
-------------------- --------------------
483 (140)
-------------------- --------------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,365) (4,184)
Sale of tangible fixed assets 632 798
Loans to joint venture (28,550) (20,950)
-------------------- --------------------
(30,283) (24,336)
-------------------- --------------------
Acquisitions and disposals
Investment in joint venture - (2,160)
Investment in associate (89) (407)
-------------------- --------------------
(89) (2,567)
-------------------- --------------------
-------------------- --------------------
Net cash outflow before financing (22,985) (25,609)
-------------------- --------------------
Management of liquid resources -Cash withdrawn/(paid into)
-blocked bank deposit 28,550 (39,050)
-------------------- --------------------
Financing
Inception of loans 900 10,000
Issue of ordinary shares 100 85,672
Expenses paid on issue of shares - (4,785)
Repayment of loans (7,548) (18,429)
-------------------- --------------------
(6,548) 72,458
-------------------- --------------------
-------------------- --------------------
(Decrease)/increase in cash 5 (983) 7,799
-------------------- --------------------
Notes to the accounts
1. The tax charge for the period is nil due to the availability of tax
losses.
2. The calculation of basic loss per share is based on the loss after tax of
#6,887,000 (31 December 2001: loss after tax #6,171,000) and on 361,112,269
(31 December 2001: 317,242,011) ordinary shares, being the weighted average
number of ordinary shares in issue. There are no dilutive potential ordinary
shares in issue.
3. Segmental Information:
Turnover Profit/(loss)
2002 2001 2002 2001
Analysis by segment
Racecourse operations 25,106 22,954 5,094 2,064
Gaming technology 7,569 3,650 1,419 (1,692)
Central costs - - (2,161) (1,844)
Goodwill amortisation - racecourses - - (308) (307)
-------------- -------------- ---------- --------------
Turnover and operating profit/(loss) 32,675 26,604 4,044 (1,779)
-------------- --------------
Share of operating loss in:
Joint venture (11,129) (3,944)
Associate (54) (308)
Goodwill amortisation in respect of joint venture (226) (14)
Net interest receivable/(payable) 478 (126)
---------- --------------
Loss on ordinary activities before taxation (6,887) (6,171)
---------- --------------
Operating profit/(loss) is stated before group management charges and income
within each business class. Central costs consist principally of expenditure
incurred in respect of the management, control and administration of the group.
The main charges relate to directors' pay, other general administrative staff
and public relations costs.
Share of operating loss in joint venture relates to the group's 33.3% equity
share of the operating loss of Attheraces Holdings Limited. Share of operating
loss in associate relates to the group's 30% equity share of the operating loss
of Trackplay LLC.
4. Reconciliation of operating profit/(loss) to net cash inflow from
operating activities
Year ended Year ended
31 December 31 December
2002 2001
#000 #000
Operating profit/(loss) 4,044 (1,779)
Depreciation charges 1,478 1,478
Amortisation of goodwill 308 307
Profit on disposal of tangible fixed assets (38) (15)
Decrease in stocks 105 21
(Increase)/decrease in debtors (1,001) 421
Increase in creditors 2,008 1,290
Decrease in provisions - (289)
----------- -----------
Net cash inflow from operating activities 6,904 1,434
----------- -----------
5. Reconciliation of net cash flow to movement in net debt:
Year ended Year ended
31 December 31 December
2002 2001
#000 #000
(Decrease)/increase in cash in the period (983) 7,799
Cash outflow from decrease in debt 6,648 8,429
----------- -----------
Change in net debt arising from cash flows 5,665 16,228
Opening net debt excluding blocked bank deposit (11,457) (27,685)
----------- -----------
Closing net debt excluding blocked bank deposit (5,792) (11,457)
----------- -----------
Blocked bank deposit 10,500 39,050
----------- -----------
Net funds including blocked bank deposit 4,708 27,593
----------- -----------
6. The group has adopted FRS 19 during the year. Adopting FRS 19 has
had no material impact on the group's current or prior year results and net
assets.
7. Restatement of comparatives
Within the gaming technology segment there has been a reclassification of
wages and salaries directly attributable to turnover from administrative
expenses to cost of sales. The effect of this change has resulted in a
restatement of the 2001 profit and loss account, increasing cost of sales by
#802,000 to #20,654,000 and reducing administration costs by #802,000 to
#7,729,000. There is no impact on the operating loss reported for 2001.
8. The blocked bank deposit is a restricted cash deposit to fund the
group's obligations to Attheraces Holdings Limited and its subsidiaries,
this being the joint venture controlled by Arena Leisure Plc, BSkyB and
Channel 4 Television. Interest on the bank deposit is payable to Arena
Leisure Plc and is unrestricted.
The monies advanced to attheraces total #49.5m, of which #37m has been paid
as part of a loan agreement, and #12.5m to meet Arena's obligations to the
working capital requirements of attheraces. The loan will be repaid (capital
and interest) from a 3% share of the gross pari-mutuel betting revenue
receivable by attheraces. The working capital element will be repaid when
attheraces generates positive cash flows in excess of operating
requirements.
9. Reserves:
Company Group
#000 #000
Profit and loss account
At 1 January 2002 (1,593) (14,735)
Transfers 4,564 4,564
Loss for year (6,430) (6,887)
-------------------- --------------------
At 31 December 2002 (3,459) (17,058)
-------------------- --------------------
The special reserve has been transferred to the profit and loss account in
accordance with the terms of a court order dated 11 April 1991 and an order
dated 5 February 1998.
10. The financial information in this statement does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The figures for the period ended 31 December 2001 have been extracted
from the accounts which have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified. The 2002 audited
accounts will be sent to shareholders shortly.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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