RNS Number:4732C Arena Leisure PLC 01 September 2004 Arena Leisure Plc ('Arena' or the 'Group') Interim results for the six months ended 30 June 2004 Highlights *Pre-tax results excluding goodwill amortisation at breakeven (2003: £1.8m loss) *Pre-tax loss reduced by 88% to £0.2m (2003: £2.0m) *Racecourse operating profit held at £3.7m, with underlying increase of 16% allowing for loss of old attheraces income and changes to industry funding of £0.6m (2003: £3.8m) *Commencement of new At The Races on 11 June 2004 *Arena's share of At The Races losses reduced to £3.0m including closure of old attheraces (2003: £5.6m) *Arena Online profits of £0.4m and closed in June 2004 (2003: £0.6m) *Capital expenditure of £5.8m, including £4.6m on the ongoing redevelopment of grandstand facilities at Lingfield Park *Bank and other debt remains low at £2.4m (31 December 2003 £0.5m deposit) Commenting on the interim results, Ian Penrose, Arena's Chief Executive said: 'These results reflect the changing emphasis of Arena's focus as we move forward. Our racecourse business continues to make good positive progress. The new At The Races has made a strong start and is pursuing its rebate claim following the closure of old attheraces. With an ongoing investment program into our spectator and racing facilities, we view the future with confidence.' - ends - For further information please contact: Ian Penrose, Chief Executive Arena Leisure Plc Tel: 020 7495 2277 Bob Mercer, Chief Financial Officer Arena Leisure Plc Tel: 020 7495 2277 David Rydell/Zoe Sanders Bell Pottinger Corporate & Financial Tel: 020 7861 3232 Chairman's Statement Introduction I am pleased to announce our results for the six months to 30 June 2004, during which period we have made significant progress. We continue to move our emphasis onto our core operating assets and our racecourse division has once again delivered strong results. We have withdrawn from our involvement in technology and, together with BSkyB, have put At The Races on a sound business and financial footing. Financial Review The unaudited interim results for the six months ended 30 June 2004 show a 1% increase in turnover to £19.3m from £19.1m in the same period last year, reflecting a 12% increase in racecourse turnover and a 57% reduction in turnover from our now closed technology operations. Operating profit from our racecourse operation was held at £3.7m, which, allowing for reductions in racecourse receipts from attheraces and central industry funding of £0.6m, represented a 16% underlying increase on 2003. Operating profit from our now closed gaming technology business reduced by 33% to £0.4m and central costs remain tightly controlled at £1.1m. The Group share of the losses and closure costs of the old attheraces business was £3m, reduced from £5.6m last year. Overall pre-tax losses have been reduced by 88% to £0.2m. Racing Review Our racecourse division has produced very encouraging results in a period of major change and uncertainty in the racing industry. We took early action to address the inevitable reductions in income that was going to accrue to our racecourses as a consequence of the termination of the attheraces media rights contract, associated ongoing costs and the removal of industry funding for starting stalls. The above items reduced our income for the half year by £600,000 and we are pleased that our racecourses delivered operating profits of £3.7m, compared to £3.8m last year; an effective underlying increase of 16%. Prize money paid out at our courses during this period increased from £5.7m to £5.9m. We are delighted that our race meetings continue to prove increasingly popular with owners, trainers and racegoers. Our third all-weather Championships, sponsored again by Littlewoods Bet Direct, culminated in March with the richest race day in the history of all weather racing when prize money in excess of £250,000 was awarded. Racecourse Developments We have continued with our strategy of investing in our racecourses to improve both the quality and experience for our wider customer base. Lingfield Park is nearing the completion of a £6m investment in the grandstand, atrium, bars, restaurants, parade ring and landscaping. The building works have caused a significant degree of disruption to the business operations and we thank our staff for their efforts and customers for their patience during this construction phase. We are at an advanced stage in the installation of a £3m world leading polytrack racing surface at Wolverhampton. Shortly, work will commence at Southwell on reconstructing the base of the fibresand racing surface, at a cost of £1.5m. Together with further improvements in our spectator facilities, we will enter 2005 looking to build upon the quality of facilities in place across our racecourses. Following a lengthy and detailed planning application and consultation process, Wolverhampton racecourse received planning approval from Wolverhampton City Council in January 2004 for the development of an integrated sports, leisure and gaming destination. The development which will include the building of a 40,000 sq ft casino, doubling the size of the existing hotel to 106 bedrooms, together with the creation of dedicated trainers and owners facilities at the racecourse, is planned to be the first integrated development of its type in the UK. The planning approval was subsequently 'called in' for review by the Government Office for the West Midlands and we have engaged all the appropriate professionals to represent us at the Inquiry which is scheduled for the end of November. We will update on progress as appropriate. Further work on development opportunities around our racecourses continues. The Office of Fair Trading ('OFT') and Arena Following a process which has been ongoing for four years, we were pleased that the Office of Fair Trading ('OFT) has reached a preliminary agreement with the British Horseracing Board ('BHB') regarding future shape and regulation of British horseracing. Many of these changes will take effect from 1 January 2006, and Arena looks forward to developing the commercial opportunities that will arise. At The Races Review The business formally known as attheraces terminated the Media Rights Agreement with the Racecourse Association ('RCA') and the 49 racecourses on 29 March 2004 as a consequence of contractual clauses relating to the Tote's betting margin. In addition, the OFT ruled that, by selling their rights on a collective basis, the 49 UK racecourses restricted competition between them when supplying attheraces and that, as a result, attheraces had to pay more for the rights than would be the case if there was effective competition. As a consequence of the above, in August 2004 At The Races commenced proceedings to recover its rights to receive rebates exceeding £50m. Strategically, we wish to ensure that live coverage of Arena's race meetings are made available to the widest possible audience. This will attract new people into the sport and onto our racecourses, enhance the value of sponsorship and advertising packages to our customers, and provide betting opportunities for the wider population away from the racecourses, revenues from which will be distributed back to our racecourses under a fair and commercial mechanism in future years. As a consequence, Arena and BSkyB came together to form At The Races and has secured the media rights to Ascot, Northern Racing Plc, Newton Abbot, the GG Media courses and the exclusive satellite and cable rights to Irish racing. The UK's only dedicated television channel for racing is broadcast on Sky channel 415, telewest 534 and ntl 908, available to over nine million homes and a potential audience exceeding 20 million people. Racing is made available to international territories through a partnership with SIS, the company who broadcast racing's pictures to the bookmaker shops in the UK, whose largest shareholders include Ladbrokes and William Hill. With the first rights payments expected to flow to the At The Races associated racecourses in October, strong partnerships domestically and globally, legal proceedings commenced for recovery of rebates, and the At The Races business being financially stable, we are pleased with the major progress that has been made. Technology Review In line with Arena's strategic aims, Arena Online Services was closed in June 2004. Acquisitions Arena is delighted that following a lengthy and exceedingly competitive tender process, we were nominated as the preferred bidder to enter into a joint venture partnership with Doncaster Metropolitan Borough Council ('DMBC') to acquire and develop Doncaster racecourse the home of the world's oldest classic horserace, the St Leger. Due diligence is underway and we would anticipate a successful completion later in the Autumn. We continue to look at a number of other acquisition and development opportunities to further develop the Group. Dividend On 11 August 2004, Arena was granted court approval to cancel its share premium account and subject to meeting the court's provisions, it will be transferred to profit and loss account reserves at 31 December 2004. The Board does not intend to pay a dividend for the six months ended 30 June 2004 but anticipates that if trading continues in the current manner, Arena will pay its maiden dividend for the full year. Looking Ahead The Group has made considerable progress over recent months and we expect this to continue in line with our stated strategy. The Board views the future with confidence. Roger D Withers Chairman 1 September 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months Six months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Note Unaudited Unaudited Audited £000 £000 £000 Turnover 4 19,288 19,105 34,302 ---------- --------- ---------- EBITDA 3,621 4,143 (17,657) Depreciation (645) (742) (1,616) Amortisation (154) (154) (308) ---------- --------- ---------- Operating profit/(loss) 4 2,822 3,247 (19,581) Share of operating loss in: Joint venture (3,031) (5,573) (21,215) Associate 9 (10) (22) Goodwill amortisation in respect of joint venture (42) (113) (226) Goodwill impairment in respect of joint venture - - (1,794) ---------- --------- ---------- Total operating loss: Group and share of joint ventures and associates (242) (2,449) (42,838) Income from other fixed asset investments - 307 Net interest (payable)/ receivable (3) 432 554 ---------- --------- ---------- Loss on ordinary activities before taxation (245) (2,017) (41,977) Taxation 2 - (443) (200) ---------- --------- ---------- Loss on ordinary activities after taxation (245) (2,460) (42,177) ---------- --------- ---------- Pence Pence Pence Basic and diluted loss per share 3 (0.07) (0.68) (11.7) ---------- --------- ---------- All amounts relate to continuing activities. All recognised gains and losses are included within the profit and loss account CONSOLIDATED BALANCE SHEET At At At 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 Fixed assets Intangible assets - goodwill 4,724 5,032 4,878 Tangible assets 60,932 55,712 55,834 --------- -------- ---------- Investments - In associate 347 350 338 - other 345 345 345 --------- -------- ---------- 692 695 683 --------- -------- ---------- 66,348 61,439 61,395 Current assets Stock 50 44 55 --------- -------- ---------- Debtors - due within one year 5,329 4,386 3,176 - due after more than one year - 57,235 - --------- -------- ---------- 5,329 61,621 3,176 --------- -------- ---------- Blocked bank deposit - 2,765 1,365 Cash at bank and in hand - 42 1,284 --------- -------- ---------- - 2,807 2,649 --------- -------- ---------- 5,379 64,472 5,880 Creditors: amounts falling due within one year (13,235) (10,902) (9,586) --------- -------- ---------- Net current (liabilities)/assets (7,856) 53,570 (3,706) Total assets less current liabilities 58,492 115,009 57,689 Creditors: amounts falling due after one year --------- -------- ---------- Share of gross assets in joint venture 3,414 24,942 5,006 Share of gross liabilities in joint venture (9,449) (45,578) (41,464) --------- -------- ---------- (6,035) (20,636) (36,458) Arena Leisure Plc loans to joint venture - - 33,968 Goodwill in respect of joint venture 2,497 1,906 - --------- -------- ---------- (3,538) (18,730) (2,490) Other (3,302) (4,665) (3,302) --------- -------- ---------- (6,840) (23,395) (5,792) --------- -------- ---------- Net assets 51,652 91,614 51,897 --------- -------- ---------- Capital and reserves Called up share capital 18,075 18,075 18,075 Share premium account 87,625 87,625 87,625 Merger reserve 5,417 5,417 5,417 Other reserves 15 15 15 Profit and loss account (59,480) (19,518) (59,235) --------- -------- ---------- Shareholders' funds 51,652 91,614 51,897 --------- -------- ---------- All shareholders' funds are equity. CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Note Unaudited Unaudited Audited £000 £000 £000 Net cash inflow from operating activities 5 3,595 4,765 7,783 Returns on investment and servicing of finance Interest received 46 546 990 Interest paid (49) (114) (257) Dividends received - - 307 ---------- ---------- ---------- (3) 432 1,040 Taxation Taxation paid - - - ---------- ---------- ---------- Capital expenditure and financial investment Purchase of tangible fixed assets (5,840) (1,658) (2,689) Sale of tangible fixed assets 67 37 130 Loans to joint venture - (7,735) (9,135) ---------- ---------- ---------- (5,773) (9,356) (11,694) ---------- ---------- ---------- Acquisition and disposals Investment in joint venture (2,025) - - ---------- ---------- ---------- Net cash outflow before financing (4,206) (4,159) (2,871) ---------- ---------- ---------- Management of liquid resources Withdrawals from short term deposits 1,365 7,735 9,135 ---------- ---------- ---------- Financing Repayment of loans (2) (2,552) (3,476) ---------- ---------- ---------- (Decrease)/Increase in cash (2,843) 1,024 2,788 ---------- ---------- ---------- NOTES TO THE ACCOUNTS 1. There have been no changes to the accounting policies of the group as set out in the financial statements for the period ended 31 December 2003. 2. The tax charge for the period is nil due to the availability of tax losses. 3. Earnings per ordinary share have been calculated using the weighted average number of shares in issue during the periods. The weighted average number of shares in issue for the six months ended 30 June 2004 is 361,495,535 (six months ended 30 June 2003: 361,495,535). There are no potentially dilutive shares in issue. 4. Segmental Information Six months Six months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited Turnover £000 £000 £000 Racecourse operations 17,995 16,126 29,094 Gaming technology 1,293 2,979 5,208 ---------- ---------- ---------- 19,288 19,105 34,302 ---------- ---------- ---------- Operating Profit Racecourse operations 3,677 3,767 7,021 Gaming technology 430 646 1,438 Central costs - excluding (1,131) (1,012) (2,015) exceptional items Exceptional items - - (25,717) Goodwill amortisation (154) (154) (308) ---------- ---------- ---------- 2,822 3,247 (19,581) ---------- ---------- ---------- Operating profit is stated before group management charges and income within each business segment. 5. Reconciliation of operating profit to net cash flow from operating activities Six months Six months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 Operating profit/(loss) 2,822 3,247 (19,581) Depreciation charges 645 742 1,616 Amortisation of goodwill 154 154 308 Loss/(Profit) on disposal of tangible fixed assets 30 (9) (67) Decrease/(increase) in stocks 5 (3) (14) Increase in debtors (2,153) (895) 315 Increase in creditors 2,092 1,529 539 Provision against loans to At The Races - - 24,667 ---------- ---------- ---------- Net cash inflow from operating activities 3,595 4,765 7,783 ---------- ---------- ---------- 6. Reconciliation of net cash flow to movement in net debt Six months Six months Year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Unaudited Unaudited Audited £000 £000 £000 (Decrease)/Increase in cash in the period (2,843) 1,024 2,788 Cash outflow from reduction in debt 2 2,552 3,476 ---------- --------- ---------- Change in net debt arising from cash flows (2,841) 3,576 6,264 Opening net funds/ (debt) 472 (5,792) (5,792) ---------- --------- ---------- Closing net (debt)/ funds (2,369) (2,216) 472 Blocked bank deposit - 2,765 1,365 ---------- --------- ---------- Net (debt)/funds (including blocked bank deposit) (2,369) 549 1,837 ---------- --------- ---------- 7. The figures for the year ended 31 December 2003 have been extracted from the accounts, which have been filed with the Registrar of Companies. The auditors' report on these accounts was unqualified and did not contain a statement under Section 237. These accounts do not comprise statutory accounts within the meaning of Section 240. This information is provided by RNS The company news service from the London Stock Exchange END IR QKDKPKBKBAFN