RNS Number:8932P
Crown Sports PLC
18 September 2003
18 September 2003
CROWN SPORTS PLC
INTERIM RESULTS
Crown Sports PLC ("Crown Sports" or the "Company"), is pleased to announce its
interim results for the six months ended 30 June, 2003.
Highlights:
* 53 % improvement in continuing operations operating profit of #1.9m.
(2002: #1.2m.)
* Net borrowing reduced to #19.5m. at period end (Dec 2002: #35.7m.)
* Resumption of membership growth in Dragons clubs - a 3% increase in
the first 6 months of 2003
* 38% improvement in retention rates in Dragons
* 12% reduction in club operating costs and a 39% reduction in central
overheads
* Intended move to AIM by end of financial year
Results:
* Group turnover at #13.7m (2002: #19.5m.)
* Group operating profit at #1.5m (2002: #2.0m.)
* Pre-tax profits at #0.4m (2002: #1.0m.)
* Earnings per share at 0.1p (2002: 0.2p)
Ray Pierce, Chairman, commented:
"The results for Crown Sports for the first six months of 2003 reflect a group
which is entirely different in structure from the corresponding period in 2002.
In line with the previously announced strategy, the disposals of the non-core
businesses have been completed and the Group is now entirely focussed on Health
and Fitness.
Although we anticipate continued subdued market conditions over the next 12
months, the Board firmly believes that the new structure is allowing management
to focus on driving core operational performance and cashflow generation. The
lower cost base across the group, the reduced level of bank debt and the large
number of property freeholds within the group increases the company's resilience
to changes in the market environment.
Dragons is now well positioned to exploit its market positioning to deliver
strong growth and financial performance."
For further information, please contact:
Crown Sports
Ray Pierce, Chairman 020 7466 5000 (Today)
Martin Grealey, Chief Executive 020 7466 5000 (Today)
Buchanan Communications 020 7466 5000
Mark Edwards, Bobbie Swanson
CROWN SPORTS PLC
Chairman's Statement
Six months ended 30th June 2003
The results for Crown Sports for the first six months of 2003 reflect a group
which is entirely different in structure from the corresponding period in 2002.
In line with the previously announced strategy, the disposals of the non-core
businesses have been completed and the Group is now entirely focussed on Health
and Fitness.
Following the sale of the Golf business agreed at the end of 2002 and completed
in January 2003, The Winning Line was disposed of during the period covered by
these financial statements and Crown Content was disposed of in August 2003.
Results
The turnover for the Group was #13.7m., Group operating profit was #1.5m. and
Group profit before tax was #0.4m.
Results in the continuing Health and Fitness business were satisfactory in a
difficult market. Total Health and Fitness turnover fell from #14.5m. to
#13.1m., a decline of 10%, but this difference was reduced to 7% on a true
like-for like basis, allowing for the increased contracting out of food and
beverage operations in our health clubs. Most of this decline was accounted for
by falling membership in the second half of 2002, producing a lower revenue base
to start the current year. However, membership growth resumed in the first half
of 2003.
Encouragingly, operating profits in Health and Fitness before goodwill
amortisation increased markedly from #1.44m. to #2.09m., a 44% increase.
Management efforts to manage the cost base more effectively produced a
significant reduction in central costs, of over #0.6m. Group operating profit
(before goodwill amortisation of #0.2m.) was #1.7m., with the disposed Crown
Content and The Winning Line contributing a loss before goodwill amortisation of
#0.4m. in the period.
As a result of our disposals the most significant change has been the reduction
in Group net borrowings, as the cash generated by the programme was used to pay
down debt. The overall financial impact of all of the disposals has been to
generate #16.6m. in cash of which, after payment of related costs, #14.9m. has
been applied to reduce our net bank debt. At the end of 2002 net borrowings
(excluding member's advances) stood at #34.96m., representing a gearing ratio of
68%. By the end of June 2003 these were reduced to some #19.48m., reducing the
gearing ratio to 38%. This has been further reduced by #1m., representing a
current gearing of 36% following the disposal of Crown Content in August.
Basic earnings per share are 0.1p (2002 0.2p). The Directors have not
recommended the payment of a dividend.
Review of operations
Our wholly owned and managed operation, Dragons, has seen member growth and
better retention in the first half of the year despite tough market conditions.
This is an entirely like for like business which has not benefited from the
rising membership trends experienced by
new openings in their early years. It is the result of improving service levels
and the more stable nature of our older customer base. The management team has
made significant progress in several areas which will position the company well
for the future.
Although there was a 7% like for like turnover decline in the continuing
business, there was a strong 44% increase in operating profit. This was due to:
- resumption of membership growth in Dragons clubs - a 3% increase in
the first 6 months of 2003, reversing the trend in the second half of
2002;
- a substantial 38% improvement in retention rates;
- 12% reduction in club operating costs and a 39% reduction in central
overhead.
Prospects for the Future
Although we anticipate continued subdued trading conditions over the next 12
months, this financial restructuring of the Health and Fitness business
increases the company's resilience to changes in the market environment. Dragons
remains well positioned to exploit its market positioning, which is underpinned
by;
- a customer offer that is targeted at a more mature and loyal
membership base;
- strong cash generation;
- a primarily freehold or long leasehold property portfolio which has
limited future exposure to rent reviews;
- a management team that is now totally focused on the Health and
Fitness business.
It is a requirement of the Listing Rules that at least 25% of Crown Sports
shares in issue from time to time remain in the hands of the public. The
Directors recognise that in view of the various major shareholdings in the
company, the percentage of Crown Sports shares in public hands is now below this
threshold and will be progressing the transfer of Crown Sports shares from the
official UK Listing Authority to the Alternative Investment Market of the London
Stock Exchange before the end of this financial year.
Ray Pierce
Chairman
17 September 2003
CROWN SPORTS PLC
Consolidated Profit and Loss Account (Unaudited)
Six months ended 30th June 2003
Continuing Operations Only
Note Six months ended Six months ended Year ended
30 June 2003 30 June 2002 31 December 2002
# 000 # 000 # 000
Turnover:
Continuing operations 13,082 14,504 28,092
Cost of Sales (228) (334) (554)
Gross Profit 12,854 14,170 27,538
Administrative expenses 7 (10,947) (12,923) (27,608)
Other operating income - - -
Group operating profit / (loss)
Continuing operations 1,907 1,247 (70)
Discontinued Operations Only
Note Six months ended Six months ended Year ended
30 June 2003 30 June 2002 31 December 2002
# 000 # 000 # 000
Turnover:
Discontinued operations 2 586 4,984 8,926
Cost of Sales (552) (1,518) (3,090)
Gross Profit 34 3,466 5,836
Administrative expenses 7 (416) (2,983) (12,614)
Other operating income - 319 679
Group operating profit / (loss)
Discontinued operations (382) 802 (6,099)
CROWN SPORTS PLC
Consolidated Profit and Loss Account (Unaudited)
Six months ended 30th June 2003
Note Six months ended Six months ended Year ended
30 June 2003 30 June 2002 31 December 2002
# 000 # 000 # 000
Turnover:
Continuing operations 13,082 14,504 28,093
Discontinued operations 586 4,984 8,925
Total turnover 2 13,668 19,488 37,018
Cost of Sales (780) (1,852) (3,644)
Gross Profit 12,888 17,636 33,374
Administrative expenses 7 (11,363) (15,906) (40,222)
Other operating income - 319 679
Group operating profit / (loss)
Continuing operations 1,907 1,247 (70)
Discontinued operations (382) 802 (6,099)
Total operating profit/(loss) 1,525 2,049 (6,169)
Profit on disposal of discontinued operations 67 - -
Income from other fixed asset investments - 149 149
Amount written back to investments 7 - - 2,893
Net Interest payable and similar charges (1,183) (1,166) (3,019)
Profit /(Loss) on Ordinary Activities Before 409 1,032 (6,146)
Taxation
Tax on profit / (loss) on ordinary 3 (131) (500) (1,021)
activities
Profit / (Loss) on Ordinary Activities after 278 532 (7,167)
Taxation
Minority interests - (29) (3)
Profit / (Loss) for the Financial Period 278 503 (7,170)
Basic and diluted profit / (loss) per share 0.1 0.2 (2.5)
(pence)
Basic and diluted earnings per share (pence) before 0.1 0.2 0.4
exceptional items and investments written off
CROWN SPORTS PLC
Consolidated Balance Sheet (Unaudited)
Six months ended 30th June 2003
Six months Six months Year ended
ended 30 June ended 30 June 31 Dec
2003 2002 2002
# 000 # 000 # 000
Fixed Assets
Intangible assets 6,071 14,143 6,772
Tangible assets 70,303 88,310 87,324
Other investments - 11,589 -
Total fixed assets 76,374 114,042 94,096
Current Assets
Stocks 386 921 675
Debtors 2,464 3,400 2,698
Investments - 72 72
Cash at bank and in hand 791 2,128 470
3,641 6,521 3,915
Creditors: Amounts falling due within one year (8,029) (10,884) (12,724)
Net Current (Liabilities) (4,388) (4,363) (8,809)
Total Assets Less Current Liabilities 71,986 109,679 85,287
Creditors: Amounts falling due after more than one (17,967) (48,496) (31,596)
year
Provisions for liabilities and charges (2,728) (2,234) (2,571)
Net Assets 51,291 58,949 51,120
Capital and Reserves
Called-up share capital 14,538 14,538 14,538
Share premium account 59,826 59,827 59,826
Capital redemption reserve 1,250 1,250 1,250
Profit and loss account (24,323) (16,799) (24,601)
Shareholders' Funds 51,291 58,816 51,013
Minority interests - 133 107
Total Capital employed 51,291 58,949 51,120
These interim results were approved by the Board on 17 September 2003.
CROWN SPORTS PLC
Cash Flow Statement (Unaudited)
Six months ended 30th June 2003
Six months Six months Year ended
ended 30 June ended 30 June 31 Dec
2003 2002 2002
# 000 # 000 # 000
Net Cash Inflow From Operating Activities 2,536 1,871 5,224
Returns on Investments and Servicing of Finance
Net Interest paid (581) (1,166) (3,325)
Dividends paid to equity shareholders by subsidiary - - (35)
Income from other fixed asset investments - 149 149
Net Cash Outflow From Returns on Investments and Servicing of
Finance (581) (1,017) (3,211)
Taxation
Cash outflow due to Corporation Tax and Australian equivalent - - (255)
Capital Expenditure and Financial Investment
Receipts from sales of fixed asset investments - - 14,486
Payments to acquire tangible fixed assets (418) (2,177) (3,130)
Receipts from sales of tangible fixed assets - - 21
Net Cash inflow/(outflow) for Capital Expenditure and
Financial Investment (418) (2,177) 11,377
Acquisitions and Disposals
Costs of acquiring subsidiary undertakings (874) - (625)
Proceeds from disposal of subsidiary undertakings 15,625 - -
Net cash balances leaving the group with disposal of
subsidiaries (305) - -
Net Cash Outflow From Acquisitions and Disposals 14,446 - (625)
Cash inflow/(outflow) Before Financing 15,983 (1,323) 12,510
Financing
Net cash inflow / (outflow) from bank loans (15,484) 1,010 (14,200)
Net cash outflow from finance leases (178) (316) (597)
Net Cash Inflow From Financing (15,662) 694 (14,797)
Decrease in Cash 321 (629) (2,287)
CROWN SPORTS PLC
Cash Flow Statement (Unaudited)
Six months ended 30th June 2003
Reconciliation of operating profit to
net cash inflow from operating activities
Six months Six months Year ended
ended 30 June ended 30 June 31 Dec
2003 2002 2002
# 000 # 000 # 000
Operating profit / (loss) 1,525 2,049 (6,169)
Goodwill - Amortisation 182 300 800
Goodwill & intangible assets - Impairment - - 7,562
Depreciation 1,174 1,322 2,726
Impairment fixed asset book value - - 1,000
Increase/(Decrease) in stocks 127 (43) 203
Increase/(Decrease) in debtors (363) (240) 914
(Decrease) in creditors (109) (1,517) (1,749)
Unrealised exchange loss - - (63)
Net cash inflow from operating activities 2,536 1,871 5,224
Reconciliation of net cash flow to movement in net debt
Six months Six months Year ended 31
ended 30 June ended 30 June Dec 2002
2003 2002
# 000 # 000 # 000
DeIncrease / (Decrease) in cash 321 (629) (2,287)
Net cash (inflow) / outflow from bank loans 15,484 (1,010) 14,200
Net cash outflow in respect of finance leases 178 317 597
Change in net debt resulting from cash flows 15,983 (1,322) 12,510
Finance leases undertaken during the year - - (485)
Finance leases that have left the group on disposal of
subsidiary undertakings 184 - -
Members' advances - 248 497
Members' advances that have left the group on disposal of
subsidiary undertakings 769 - -
Loans that have left the group on disposal of subsidiary
undertakings 4 - -
Exchange loss on foreign currency loans (695) - -
Movement in net debt for the year 16,245 (1,074) 12,522
Net debt at 1st January (35,729) (48,251) (48,251)
Net debt at 30th June / 31st December (19,484) (49,325) (35,729)
CROWN SPORTS PLC
Consolidated Statement of Total Recognised Gains and Losses (Unaudited)
Six months ended 30th June 2003
Note Six months Six months ended Year ended 31
ended 30 June 30 June 2002 Dec
2003 2002
# 000 # 000 # 000
Profit / (Loss) for the financial period 278 503 (7,170)
Exchange loss on foreign currency translation - - (130)
Total recognised gains and (losses) relating
to the period 278 503 (7,300)
Prior year adjustment 6 - (1,734) (1,734)
Total recognized (loss) / gain since last
annual report 278 (1,231) (9,034)
CROWN SPORTS PLC
Notes to the Interim Report (Unaudited)
Six months ended 30th June 2003
1. Accounting Policies
The interim report has been prepared using accounting policies consistent with
those adopted by the Group in its financial statements for the year ended 31
December 2002.
2. Managed Turnover
Until the disposal of Crown Golf on 8th January 2003, Batchworth Park Golf Club
and South Winchester Golf Club (1993) were managed by Group Companies, hence the
Groups interest in these clubs is reflected for statutory purposes as management
fees. The underlying turnover at these clubs was nil (30 June 2002: #1,238,000,
31 December 2002: #2,640,000).
3. Taxation
Taxation has been provided on the basis of estimated rates for the financial
year as a whole and after taking account of tax losses available from the
previous year and a provision for deferred taxation as required by Financial
Reporting Standard 19 'Deferred Taxation'. Given trading losses brought forward
at 1st January 2003 and capital allowances available for the year, it is
unlikely any UK corporation tax will be payable relating to the 6 months to June
2003. However as required by Financial Reporting Standard 19 'Deferred
Taxation' the Profit and Loss Account includes a provision for deferred taxation
that may become payable at some future date.
4. Earnings Per Share
Earnings per share have been calculated on the net basis on the profit for the
financial period, after taxation, of #278,000 (30 June 2002: #503,000 31
December 2002: #7,170,000 loss) using the weighted average number of ordinary
shares in issue of 290,768,005 (30 June 2002: 290,768,005; 31 December 2002:
290,768,005).
5. Basis of Preparation
This interim report for the six months ended 30 June 2003 is unaudited and was
approved by the Directors on 17 September 2003. The financial information set
out does not constitute statutory accounts within the meaning of section 240 of
the Companies Act 1985. The information at 31 December 2002 has been extracted
from statutory accounts relating to the year ended 31 December 2002 which has
been filed with the Registrar of Companies.
6. Prior Year Adjustment
The Group adopted Financial Reporting Standard 19 'Deferred Taxation' during
2002. This standard requires full provision to be made for deferred taxation on
most types of timing differences. The previous standard required provision only
to the extent that it was probable the liability would crystalise in the
foreseeable future. Adoption produced a prior year adjustment, resulting in a
reduction in opening reserves at 1 January 2002 of #1,734,000.
CROWN SPORTS PLC
Notes to the Interim Report (Unaudited)
Six months ended 30th June 2003
7. Exceptional items
The results for the year ended 31 December 2002 include the following
exceptional items:
2002
#'000
Administrative expenses
Impairment of goodwill and other intangible assets 6,692
Impairment of fixed assets 1,000
Cost of restructuring of continuing operations 428
Costs of put option re: The Winning Line 870
Bid defence costs 1,500
Exceptional operating items 10,490
Amounts written back to trade investments (2,893)
Refinancing costs on early repayment of loans 776
Total exceptional items 8,373
The exceptional operating costs all relate to discontinued activities.
CROWN SPORTS PLC
Independent Review by KPMG Audit Plc to Crown Sports Plc
Six months ended 30th June 2003
Introduction
We have been instructed by the company to review the financial information set
out of pages 4 to 11 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review Work Preformed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board. A review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether accounting policies and
presentation have been consistently applies unless otherwise disclosed. A review
is substantially less in scope than an audit preformed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
KPMG Audit Plc
London
Chartered Accountants
17 September 2003
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