London Clubs International PLC
21 July 2005
London Clubs International plc
Preliminary results for the year ended 27 March 2005
London Clubs International plc is an operator of 7 casinos in the UK and 3
overseas.
Key points
• 2004/5 a challenging year for both the Company and the Gaming industry
• Volatility of the London high end particularly in the second half resulted
in a low win percentage, but this was partially off-set by good trading
in South Africa
- Total operating profit of £12m
- Pre-tax loss of £1.4m
- Basic loss per share of 0.4p
• Current Trading
- London similar to last year
- Provinces achieving higher levels of win
- Overseas trading well
• London Clubs is well positioned for the future
- 2005/6 will see full year contributions from Fifty and the Sportsman
- Early freedoms provide the opportunity to develop the estate
- Four new licences secured over the last year to add to Manchester -
all able to open before introduction of new legislation in 2007
- Undeveloped space at the Rendezvous, Southend and Brighton to be
utilised
Michael Beckett, Chairman of London Clubs, commented:
'After the turmoil of last year the Company is well positioned for the future.
There are opportunities to extend our existing estate and also develop new
casinos, where we have won licences, expanding the Company further in the
provinces.'
21 July 2005
Enquiries:
London Clubs International plc
Bill Timmins, Chief Executive +44 (0)20 7518 0000
Linda Lillis, Finance Director
College Hill Associates
Matthew Smallwood +44 (0)20 7457 2020
Introduction
2004/5 has been a challenging year for the Company and the gaming industry as a
whole. In March, after much debate and many changes to the draft Gambling Bill,
the Gambling Act was passed giving the industry a new legislative framework with
which to work. During the year under review the Company has maintained a
flexible stance on its development pending the outcome of the legislative
process. This has proved a prudent strategy with the Company now well
positioned to capitalise on the legislative changes.
In addition, the Company completed a £49 million fundraising and renegotiated
its bank debt. A number of the Group's casinos have faced disruption during the
year as they either moved site or were refurbished, and new money laundering
regulations introduced at the start of the year caused some disruption,
especially in the UK operations outside London.
The Group has secured four further new licences in Glasgow, Nottingham, Leeds
and Blackpool giving a total of seven provincial licences. There are also plans
to expand a number of the existing operations significantly.
Results
Group Operating Profit before joint venture income was £14.6m (2004: £15.5
million). This decline in profitability was primarily due to volatility at the
London high end, although it was partially offset by good trading and the sale
of unused gaming positions in South Africa. Pre tax loss was £1.4m (2004: pre
tax profit £2.5m). Loss per share was (0.4p) (2004: 0.9p earnings per share).
Operations
UK
As reported in our pre-close statement in April, trading at Les Ambassadeurs and
disruption to the operations of the Sportsman and Fifty resulted in the profit
generated by the Group's London casinos being significantly reduced for the
year.
Les Ambassadeurs enjoyed strong trading levels during the first half of the
year, but whilst levels of drop were maintained, results in December and January
were subject to volatility and a low win percentage. Although trading improved
significantly in February and March, it was not enough to offset the previous
months.
Across the rest of the London estate, the Rendezvous reported a strong year with
record levels of gaming win. The Sportsman was closed for four months,
re-opening in December 2004 and consequently did not make a contribution to
group profits this year. Trading at the Golden Nugget was impacted at the
beginning of the year by the introduction of money laundering regulations and
consequently its contribution was below the previous year. After protracted
negotiations, we have renewed the lease on acceptable terms and work has
recently commenced on a refurbishment at this casino with completion scheduled
for August 2005.
Gaming win at both Southend and Brighton was ahead of the previous year, and
consequently these casinos increased their contribution to Group profits.
Overseas
The group's casinos in Cairo once again traded well achieving similar levels of
business to the exceptional trading enjoyed in the prior year. The casino
franchise in Taba was sold in May 2004, which together with the weakness in the
US dollar has impacted the overall reported results.
The Emerald Casino in South Africa has once again achieved excellent results.
EBITDA increased by over 30% on the previous year, driven by strong growth in
revenue and improved cost control. In addition, the sale of unused gaming
positions to another operator raised £2.1 million, which has enabled the Group
to reduce borrowings in South Africa.
Joint Venture - Fifty
During 2004/05 Fifty experienced significant disruption to trading whilst the
property was substantially refurbished, and losses at the property increased
over the previous year. All works have now been completed and the property is
fully operational. Since its launch Fifty has made an excellent start with the
restaurants, bars and nightclub attracting critical acclaim. Membership sales
have been strong and there is continued interest in this exciting new
development. The casino has been achieving increased attendances and the
challenge going forward is to ensure the re-positioned club continues to
increase its share of the London market.
Deregulation
There is now considerably more certainty with regard to the deregulation
process. Early Freedoms, including the removal of the 24 hour rule, increased
numbers of slot machines and increased stakes and prizes, present opportunities
to grow our casino operations. We understand that these changes will be
introduced in October 2005. The remaining benefits of deregulation are
expected to be introduced in Autumn 2007 when membership requirements will no
longer be necessary and the ability to market and advertise more widely will be
permitted.
Development
The Group's strategy is to continue to expand its operational base to take full
advantage of the opportunities presented by deregulation and reduce dependence
on the performance of the high end operations.
In the last year London Clubs has added four new licences in Glasgow, Leeds,
Nottingham and Blackpool to the already secured location in Manchester, and the
existing operations in Southend and Brighton. All of these licences have been
awarded under the 1968 legislation and therefore will be able to open prior to
the introduction of new legislation in 2007. We expect to take possession of the
property in Manchester in the Autumn this year, at which time the fit out work
will commence. This casino is expected to be completed in Summer 2006.
Work will also commence on the undeveloped space at casinos in Southend,
Brighton and the Rendezvous in London, where it is intended to develop a
contemporary and complementary electronic gaming product to take advantage of
the opportunities presented by the Early Freedoms.
Development plans and schedules are being drawn up for the other licences with
openings being scheduled in 2007 and 2008. It is intended that all the new
casinos will offer a modern, exciting leisure destination comprising
restaurants, bars, gaming, both traditional and electronic and other facilities.
Additionally, the Company will continue to evaluate opportunities for new
licences under the existing legislation.
Marketing of casinos, previously restricted, will become more important in the
future. Through its experience gained in operations abroad and arrangements
such as the marketing alliance with Societe des Bains de Mer Monte-Carlo, London
Clubs is well placed to take advantage of these changes.
Board
During the year responsibilities on the Board saw some change. Bill Timmins
became Chief Executive and Barry Hardy, formerly Chief Operating Officer, became
Executive Deputy Chairman. These changes became effective in January 2005.
Outlook
In the period since the end of March, overall, the London casinos have traded in
line with the previous year. The provincial casinos have achieved levels of win
in excess of last year and attendances have also recovered following the
introduction of money laundering regulations last year.
Overseas the casinos in Cairo continue to trade well with levels of business in
excess of the previous year. Following two years of high growth, the Emerald
Casino is trading at similar levels to last year.
2005/6 will also see Fifty and the Sportsman operating for the full period.
The Board believes that London Clubs is very well positioned for the future.
The Group will benefit from the Early Freedoms outlined in the new Gambling
legislation and from the development of existing additional space available
across its estate. Additionally, it has the opportunity to develop its five new
licences.
The Board believes that its strategy of expanding its operations outside London
and the opportunities presented by deregulation provide an environment in which
further progress can be made.
Consolidated profit and loss account
for the year ended 27 March 2005
Year ended Year ended
27 March 28 March
2005 2004
Notes
£'000 £'000
Turnover (including share of joint venture) 2 143,802 163,418
Less: share of turnover of joint venture (4,160) (3,127)
Turnover 139,642 160,291
Operating costs before exceptional items
- Gaming taxation (40,017) (48,317)
- Other operating costs before exceptional (87,143) (89,446)
items
(127,160) (137,763)
Group operating profit before exceptional
items 12,482 22,528
Exceptional items 3 2,146 (6,985)
Net operating costs (125,014) (144,748)
Group operating profit 14,628 15,543
Share of operating loss in joint venture 2 (2,599) (1,262)
Total operating profit: Group and joint 12,029 14,281
venture
Net interest payable and similar items
- Group (13,521) (11,756)
- Joint venture 63 -
5 (13,458) (11,756)
(Loss) / profit on ordinary activities before (1,429) 2,525
taxation
Tax on (loss) / profit on ordinary activities 594 (1,059)
(Loss) / profit on ordinary activities after (835) 1,466
taxation transferred (from) / to reserves
Basic (loss) / earnings per share 6 (0.4)p 0.9p
Diluted (loss) / earnings per share 6 (0.4)p 0.9p
Basic (loss) / earnings per share before 6 (1.4)p 3.7p
exceptional items
All activities relate to continuing operations.
Consolidated balance sheet
as at 27 March 2005
27 March 28 March
2005 2004
£'000 £'000
Fixed assets
Tangible assets 246,148 240,936
Investments 990 990
247,138 241,926
Current assets
Stocks 1,424 1,381
Debtors 21,777 17,377
Cash at bank and in hand 16,137 30,124
39,338 48,882
Creditors: amounts falling due within one year (20,971) (216,497)
Net current assets / (liabilities) 18,367 (167,615)
Total assets less current liabilities 265,505 74,311
Creditors: amounts falling due after one year (139,304) -
Provision for liabilities and charges
Interest in joint venture
- share of gross assets 2,407 738
- share of gross liabilities (6,203) (2,000)
(3,796) (1,262)
Net assets 122,405 73,049
Capital and reserves
Called up share capital 11,124 7,369
Share premium account 126,667 80,654
Merger reserve 5,352 5,352
Revaluation reserve 107,449 107,449
Profit and loss account (126,995) (126,583)
Equity shareholders' funds 123,597 74,241
Equity minority interests (1,192) (1,192)
122,405 73,049
Consolidated cash flow statement
for the year ended 27 March 2005
Notes Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Cash flow from operating activities 7 2,263 26,023
Returns on investments and servicing of finance (18,106) (14,876)
Taxation (388) 66
Capital expenditure and financial investments (8,103) 23,937
Acquisitions and disposals - 34,293
Cash (outflow) / inflow before financing (24,334) 69,443
Financing 9,892 (58,837)
(Decrease) / increase in cash in the year (14,442) 10,606
Reconciliation of net cash flow to movement in net debt
for the year ended 27 March 2005
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
(Decrease) / increase in cash in the year (14,442) 10,606
Cash outflow from decrease in debt 46,940 58,837
Other non cash changes (323) (2,294)
Translation differences (1,270) 2,617
Movement in net debt in the year 30,905 69,766
Net debt at beginning of year (154,048) (223,814)
Net debt at end of year (123,143) (154,048)
Statement of total recognised gains and losses
for the year ended 27 March 2005
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
(Loss) / profit transferred (from) / to reserves (835) 1,466
Exchange gain on retranslation of net assets of 423 772
subsidiary undertakings
Total gains and losses relating to the year (412) 2,238
Reconciliation of movements in equity shareholders' funds
for the year ended 27 March 2005
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Opening equity shareholders' funds 74,241 72,003
(Loss) / profit attributable to equity shareholders (835) 1,466
Exchange gain on retranslation of net assets of 423 772
subsidiary undertakings
Proceeds of rights issue 51,585 -
Expenses of rights issue (2,845) -
Proceeds from exercise of share options and warrants 1,028
Closing equity shareholders' funds 123,597 74,241
1. Basis of preparation
The results for the years ended 27 March 2005 and 28 March 2004 do not comprise
statutory accounts for the purpose of section 240 of the Companies Act 1985 and
have been extracted from the Group's 2005 accounts, approved by the directors on
21 July 2005, which have not yet been filed with the Registrar of Companies and
from the Group's 2004 accounts which have been filed with the Registrar of
Companies, respectively. The 2005 and 2004 accounts each include the auditors'
report which was unqualified and did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.
The financial information has been prepared under the historical cost convention
as modified by the revaluation of short leasehold properties and in accordance
with applicable Accounting Standards in the United Kingdom. The financial
information has been prepared on a basis consistent with prior years.
The Group profit and loss account is presented on the basis of Format 1 of the
Companies Act 1985. Due to the subjectivity required in the allocation of
expenditure between operating costs and administrative expenses, the directors
conclude that an aggregation of these costs is more appropriate and, therefore,
the profit and loss account does not include a split of such costs.
2. Segmental analysis
Operations by geographical segment:
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Turnover
Europe 102,311 120,993
Middle East 17,589 21,543
Africa 23,902 20,882
143,802 163,418
The Group's share of turnover from joint ventures amounted to £4,160,000 (2004:
£3,127,000) and is included within Europe. The geographical analysis of turnover
is based on the country of origin. It would not be materially different if
based on the country of destination. Turnover between segments is immaterial.
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Group operating profit before exceptional items 12,482 22,528
Exceptional items - Africa (note 3) 2,146 -
Exceptional items - USA (note 3) - (6,985)
Share of operating loss in joint venture (2,599) (1,262)
Total operating profit (see note below) 12,029 14,281
Interest receivable and similar income
- Group (Europe) 783 395
- Share of joint venture (Europe) 63 -
Group interest payable
- Europe (12,610) (9,531)
- Africa (1,694) (2,620)
(Loss) / profit on ordinary activities before taxation
(1,429) 2,525
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Total operating profit
Europe 1,584 14,636
Middle East 2,302 2,981
Africa 8,143 3,649
USA - (6,985)
12,029 14,281
For the purposes of segmental analysis all head office costs have been allocated
to Europe.
27 March 2005 28 March
2004
£'000 £'000
Net assets / (liabilities)
Europe 119,804 76,508
Middle East 5,009 4,852
Africa (2,408) (8,311)
122,405 73,049
Substantially all of the Group's turnover, operating profit and net assets
relate to the operation of casinos.
3. Exceptional items
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Profit on sale of South African gaming rights 2,146 -
Satisfaction of contingent liabilities relating to Aladdin - (6,302)
Professional fees relating to Aladdin - (683)
2,146 (6,985)
On 27 October 2004 the Group sold unutilised gaming rights held by the Emerald
Casino Resort in South Africa. Rand 24.7 million was received for the sale of
these rights, which were awarded to the resort as part of the original
acquisition of its gaming license in Gauteng province.
The exceptional charge in the prior year relates to payments by the Group of
£6.3 million, to the Aladdin Banking Syndicate, in settlement of all outstanding
obligations to them.
4. Dividends
No dividend is proposed for the year ended 27 March 2005 (2004: nil).
5. Net interest payable and similar items
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Interest payable on bank loans and overdrafts 12,566 14,087
Amortisation of issue costs of bank loans 889 -
Interest payable on guaranteed senior loan notes 158 2,121
Exchange loss / (gain) on facilities:
- guaranteed senior loan notes 691 (4,057)
Total Group interest payable 14,304 12,151
Group interest receivable and similar income (783) (395)
Group net interest payable and similar items 13,521 11,756
Share of joint venture interest receivable (63) -
Net interest payable and similar items 13,458 11,756
6. Earnings per share
Basic earnings per share for each year has been calculated on profit
attributable to equity shareholders divided by the weighted average number of
ordinary shares deemed to be in issue during the year. The weighted average
number of shares has been adjusted for the bonus element of the rights issue
which completed on 19 April 2004. Figures for the prior year have been restated
accordingly.
Diluted earnings per share has been calculated in accordance with Financial
Reporting Standard 14, 'Earnings Per Share'. The increase of 2,035,000 in the
weighted average number of shares, included in the diluted earnings per share
calculation, is attributed to warrants granted to members of the Aladdin banking
syndicate (1,954,000 shares) and share options under the Company's sharesave
schemes (81,000 shares).
The basic earnings per share before exceptional items is considered, by the
directors, to be an additional useful measure of the Group's performance for the
year under review. This measure is calculated by excluding post-tax exceptional
income of £2,146,000 (2004: charges of £4,889,500) from the Group's earnings for
the year and results in a decrease in basic earnings per share of 1.0 pence
(2004: increase of 2.8 pence).
The earnings and weighted average number of shares used in the calculation of
basic and diluted earnings per share are as follows:
Year ended Year ended
27 March 28 March
2005 2004
Basic (loss) / earnings per share (pence) (0.4) 0.9
Earnings (£'000) (835) 1,466
Weighted average number of shares ('000) 218,880 172,336
Diluted (loss) / earnings per share (pence) (0.4) 0.9
Earnings (£'000) (835) 1,466
Weighted average number of shares ('000) 220,915 172,463
Basic (loss) / earnings per share before
exceptional items (pence) (1.4) 3.7
Earnings (£'000) (2,981) 6,356
Weighted average number of shares ('000) 218,880 172,336
7. Reconciliation of operating profit to operating cash flow
Year ended Year ended
27 March 28 March
2005 2004
£'000 £'000
Group operating profit 14,628 15,543
Depreciation 3,941 4,456
Profit on disposal of fixed assets (41) (38)
Increase in stock (29) (329)
Increase in debtors (5,452) (2,272)
(Decrease) / increase in creditors (10,784) 8,663
Net cash inflow from operating activities 2,263 26,023
This information is provided by RNS
The company news service from the London Stock Exchange
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