TIDMSCEL
RNS Number : 0277L
Sceptre Leisure PLC
26 July 2011
Sceptre Leisure plc
("Sceptre" or the "Group")
Market share gains, strong cash generation, debt reduction.
Sceptre Leisure plc, an AIM listed company with its principal
activities centred on the provision of gaming, lottery and leisure
equipment, announces final results for the twelve months to 30
April 2011.
Key Operational and Financial Highlights
-- Underlying business continues to show market share growth
o Awarded new contracts with Punch Pub Company, SA Brains and
The McManus Pub Company
o Renewed contracts with Joseph Holt, Daniel Thwaites and De
Vere Hotels
o Machine rental business performed strongly with total machines
up to 19,000 (Group total 22,500 machines)
-- Acquisition of RV Smith assets for GBP1.2m improved personnel
ratios and machine density in Southern England
-- SWP income reduced by GBP1m as a result of regulatory change
by HMRC
-- Revenues of GBP38.6m delivering PBT of GBP1.6m despite
external factors
-- Net debt further reduced by GBP2.5m to GBP13.4m
KPIs
-- Asset utilisation maintained at 95% (2010: 95%)
-- Machine week average (MWA) GBP25.47 (2010: GBP25.83)
-- Lottery terminals up 4% to 3,500 (2010: 3,400)
-- Pub lottery sales increased 38% to GBP0.23m (2010:
GBP0.17m)
Current Trading
-- Early results show Q4 trends continuing into the new
financial year
-- Strong cost controls in place to mitigate effects of lower
revenues
-- Start of English football season traditionally produces
upturn in income
Ken Turner, Chief Executive, said:
"This has been another year of progress for Sceptre Leisure that
has seen the business continue to grow in size through both through
acquisition and contract wins. Our outperformance is a result of
our ability to offer clients a gaming machine solution that is far
superior to any of our competition. The contracts that we have won
are testament to that. Trading conditions are not easy but through
careful management and dedication we continue to progress towards
our target to become the largest machine operator within the pub
market."
26 July 2011
Enquiries:
Sceptre Leisure plc
Ken Turner Today: +44 (0) 20 7457 2020
Mark White Thereafter: +44 (0) 1772 694242
Panmure Gordon (NOMAD)
Andrew Burnett
Adam Pollock
Rakesh Sharma +44 (0) 20 7459 3600
College Hill
Matthew Smallwood
Jamie Ramsay +44 (0) 20 7457 2020
Chairman's statement
"Sceptre has continued to reduce gearing over the course of the
year, with net debt down to GBP13.4m from GBP15.9m, underlining the
strong cash generation provided by our core business."
Results
Sceptre has delivered a creditable set of results in another
year of challenging trading conditions with the core business
performing well. Our prior year comparative figures included the
fixed-odds betting terminal machine operation, sold in April 2010
for a substantial profit, and like-for-like comparisons are
therefore difficult to make. However, our acquisition of RV Smith
in November 2010, and the award of a new contract by Punch's
managed division have allowed us to build on the good start
reported in our interim statement.
We have continued to reduce gearing further over the course of
the year, with net debt down to GBP13.4m in April 2011 from
GBP15.9m. This underlines the strong cash generation provided by
our core business delivered from our recurring revenue stream from
machine rentals.
Acquisition
Sceptre acquired the machine assets and operations of
Surrey-based RV Smith (Leisure) Limited in November 2010 for a
total consideration of GBP1.2m, paid in a mixture of cash and
shares. This transaction further strengthened our position in the
south of the UK. As with our previous acquisitions, the additional
assets were quickly and efficiently absorbed into our operational
infrastructure.
Contract Wins
In addition to the Punch contract win reported previously,
Sceptre has been able to announce a number of new or renewed
contracts in the second half of the year. Some of these have been
with longstanding customers such as Joseph Holt, Daniel Thwaites
and De Vere Hotels, whilst others have been with new clients such
as the McManus Pub Company. All of these contract awards are the
result of our commitment to customer service and the operational
know-how provided by our team.
People
It is our employees that set us apart from the competition and
give us a critical competitive advantage. Our operational teams are
continually raising the bar in delivering customer service and
quality. I would like formally to thank all members of the Sceptre
team for their continued efforts; they should feel proud of their
contribution towards this year's results.
Outlook
We will continue to pursue our strategy of growth through
organic contract wins and selected acquisitions financed by
internal cash generation. Sceptre remains the first-choice operator
in the pub and club market.
Douglas Yates Chairman 26 July 2011
Chief Executive's Review
"We have grown our machine rental business in the core pub
market."
I am pleased to be able to report another year of progress for
Sceptre Leisure. We have grown our machine rental business in the
core pub market through both organic contract wins and selected
acquisitions, and we continue to develop the Kelly's Eye brand
across a wide range of leisure outlets.
We have reduced net debt by some GBP2.5m during the period under
review, whilst continuing to invest in our machine estate to ensure
that we are able to offer our customers a wide choice of games
suitable for varying locations.
Profitability
As reported in our interim statement, we began the financial
year with a reduced machine base following the sale of our fixed
odds betting terminal (FOBT) estate in April 2010. Revenue and
profit for the first half of the year were therefore both at a
lower run rate than the second half of the previous year.
In addition, regulatory changes surrounding games offered on
quiz machines (SWPs) in April 2010 saw income from these assets
reduce as some game content was removed to comply with HMRC
requirements. This had an adverse effect on shared income from SWPs
which resulted in Sceptre's weekly revenue per machine falling from
an average of GBP29.98 in 2010 to GBP23.82 over the past year. On a
machine estate of some 3,100 pieces, this equated to fall in
revenue of GBP19,000 per week, the full GBP1m effect of which
flowed through to reduce our profit for the financial year.
Action was taken to reduce our operating costs, and as a result,
staff overhead spend was lower in Q4 than in Q1 in spite of a
larger machine estate following the acquisition of RV Smith and the
award of the new Punch contract. Accordingly, in spite of an
acquisition and organic growth in machine numbers, our income was
adversely affected and our full year profitability was therefore at
the lower end of our expectations.
Sceptre Leisure Solutions
As discussed above, revenue within our machine rental business
reduced year on year. This is due both to the sale of our fixed
odds betting terminal (FOBT) machines at the end of FY2010 (which
contributed cGBP2.5m turnover in the prior year), and also to pub
companies moving away from charging royalties to tenants as part of
the machine contract (a reduction of GBP1.3m compared to 2010).
This reduction in royalty revenues had no effect on the
division's profitability, as all charges recognised in revenue are
passed on directly to the pub company as a cost of sale. For this
reason, whilst turnover within Sceptre Leisure Solutions fell
during the year under review, the gross margin percentage grew over
the same period.
These two changes in our business have necessitated a
recalculation of one of our main KPIs; machine week average (MWA).
This change is explained fully in the KPI section of the financial
review and allows a better comparison of the division's performance
over time. We maintained our MWA year-on-year in spite of changes
to the games available on our skills with prizes (SWP) terminals as
a result of an HMRC ruling on content. These changes resulted in a
20% reduction in revenue from this class of machine equivalent to
GBP1m per year - a reduction reflected across the entire machine
operating industry. We took swift action to mitigate these losses
through the negotiation of new software licenses at reduced cost
where possible.
Following the sale of the FOBT operation in April 2010 we took
the opportunity to reduce debt with part of the GBP3.75m proceeds.
After a period of consolidation in H1, we were pleased to announce
the award of a major contract with the Punch Pub Company to supply
around 30% of their managed estate. The three-year contract
covering around 800 machines marks another important milestone in
Sceptre's development.
Our contract pipeline remained strong throughout the remainder
of the financial year, and we confirmed the renewal of longstanding
relationships with Joseph Holt and Daniel Thwaites whilst also
winning new business with de Vere Hotels and The McManus Pub
Company.
These contract wins underline our position as the preferred
machine operator for most pub companies within the UK. Our figures
show that Sceptre consistently generates higher machine income for
our customers wherever it competes head-to-head with our main
national competitor within a pub company's estate. This
outperformance is due to our operational team whose drive for
quality and service keeps us at the forefront of the industry. I am
proud to work with such a talented group, and would like to take
the opportunity to thank them for their hard work and dedication
over the course of the year.
Overall performance within the machine rental division was
strong given the trading environment, reflecting increased machine
numbers in the second half of the year, and also the contribution
made by the acquisition of the assets and operations of RV Smith
(Leisure) Limited in November 2010. This has allowed us to improve
our operational ratios further, increasing machine density in the
Southern UK. We also achieved a higher average number of machines
operated per person employed within the division; up to 49 at 30
April 2010, from 47 the previous year, and maintaining our asset
utilisation rate at our target of 95%.
Acquisition
On 29 November 2010 we announced the acquisition of the machine
assets and operations of RV Smith (Leisure) Limited for a total
consideration of GBP1.2m. The purchase price was made up of GBP0.8m
in cash with the remainder satisfied by the issue of 1.4m shares at
the market price of27.7p on the day of completion.
The assets acquired consisted of 925 machines in 277 locations
across the south of the UK. Our strong and flexible infrastructure
meant that this new business could be absorbed within our existing
depot network without the need for new premises. We were pleased to
welcome the transferring employees, who were quickly and
efficiently incorporated into Sceptre's operation in the days
following the acquisition.
The acquisition further strengthened our position in the south
of the UK, and provided improved density within our London and
Bournemouth depots. We will continue to follow a strategy of growth
through selected acquisitions, assuming that the price and overall
fit of the targets are right.
Lotteryking
We improved market penetration of our lottery terminals over the
course of the year, with terminal numbers in pubs and clubs
increasing by 4% to 3,500 in the period under review.
We also grew lottery sales within pubs, achieving a 38% increase
in sales to GBP0.23m during the financial year. These lotteries
also raised over GBP90,000 for charity over the period.
The registered members' club market has contracted significantly
over the course of the recession, with many clubs closing and
others seeing a reduction in footfall particularly in the past
year. For this reason private lottery revenue fell year-on-year,
although our restructuring of this division at the end of the 2010
financial year saw losses reduce.
We will continue to work on maximising our return from existing
assets within this division, while ensuring that it contributes to
overall Group cash flow in the coming year.
Kelly's Eye
October 2010 saw the launch of Kelly's Catalogue which brought
together a full range of fundraising, indoor gaming, catering and
bar products aimed at the licensed market for the first time. We
will continue to use this as a tool in order to increase our
penetration of the pub and club market, with an aim to establish
Kelly as the leading supplier within the UK.
Outlook
Sceptre continues to grow its installed machine estate, and our
ambition is to become the largest machine operator within the pub
market over the next eighteen months whilst maintaining or
increasing our margins.
The market is ripe for further consolidation, and we will
identify suitable acquisition targets that will enhance our
existing machine estate.
We will also pursue contracts with both new and existing
customers, further cementing our position as the preferred operator
for national, regional and local pub companies across the UK.
Finally, we will develop the Kelly's Eye brand within the
leisure market using our existing customer base to increase sales
and add incremental profit across our divisions in the coming
months.
Current trading
Trading in the early part of the new financial year continues
the trends seen in Q4 of the period under report. Consumer
confidence remains fragile, and this has been reflected in recent
trading updates from several national pub companies.
As a result, we have taken steps to reduce our cost base to
mitigate the effects of reduced income levels from SWPs and other
shared income machines.
However, Sceptre remains well-placed to benefit from the upswing
in pub customer spend traditionally seen as the English football
season gets underway.
Kenneth Turner
Chief Executive
26 July 2011
Financial Review
I would like to take the opportunity to review some key areas of
our financial performance in the year under report.
Revenue
Group turnover decreased GBP4.2m, or 9.8%, to GBP38.6m due to a
number of factors. The Fixed Odds Betting Terminal (FOBT) assets,
which were sold in April 2010, had contributed GBP2.5m of sales in
the previous year. In addition, a decrease in machine royalties
charged by national pub companies resulted in a further GBP1.3m of
revenue reduction, although this had no effect on gross margin as
any revenue is passed on directly as a cost of sale. Finally, the
change in legislation affecting the games offered on quiz machines
(SWPs) accounted for a further 20%, or GBP1.0m, reduction in
revenue. These reductions were offset by gains through organic
contract wins and the acquisition of RV Smith's machine assets
during the course of the year.
Profitability
Operating profit before exceptional items decreased by 41% to
GBP2.4m, whilst profit before tax decreased by 14% to GBP1.6m.
The machine operating division, representing 92% of the Group
revenues achieved operating profits of GBP3.9m (2010: GBP5.1m). The
principal reason for this reduction was the sale of the fixed odds
betting terminal assets at the end of the 2010 financial year,
which meant that the division began 2011 with a lower machine asset
base (and therefore lower revenue levels) than had been achieved in
2010. The sale of those assets had also provided GBP0.5m of
operating profit in 2010. Finally, the division incurred a higher
(non-cash) amortisation charge of GBP0.5m (2010: GBP0.2m) as a
consequence of recognising and amortising intangible assets under
IFRS.
Corporate overheads amounted to GBP0.9m (2010: GBP0.9m) and
comprised the costs of the Board, legal, professional and other
fees connected with running a public company.
Other divisions improved their year-on-year performance,
contributing a reduced operating loss of GBP0.2m (2010: GBP1.0m)
following a restructure of the operational functions to reduce
costs.
There was also an employee share-based payment charge of GBP0.1m
(2010: GBP0.1m) recognised in the year.
Earnings per share
Basic earnings per share reduced to 2.5p (2010: 3.0p).
Finance costs
The net finance costs charged to income were GBP1.1m (2010:
GBP1.3m). This is made up of GBP1.3m in cash interest paid (2010:
GBP1.4m) with balancing finance income of GBP0.2m relating to a
non-cash, interest rate swap movement gain during the year (2010:
GBP0.1m gain).
The derivative contract was a condition of the Group's banking
agreements with Bank of Scotland (now part of Lloyds Banking
Group), and was designed to continue alongside this facility until
the end of the term loan in October 2012.
Acquisition
On 29 November 2010 Sceptre Leisure Plc announced the
acquisition of the trade and assets of RV Smith (Leisure) Limited
in a combined cash and shares deal. The acquisition is disclosed in
note 7.
Exceptional Costs
During the year the Group incurred certain one-off restructuring
costs. These centred on provisions for redundancy, and other costs
associated with corporate restructuring.
In addition, the Directors considered that the brand names of
Lotteryking and Kelly's Eye had suffered impairment during the
year, giving rise to a cost of GBP49,000 (2010: GBP227,000).
Finally, a fair value adjustment under IFRS3 following the
acquisition of the trade and assets of RV Smith (Leisure) Limited
led to the recognition of a gain on bargain purchase of GBP0.7m.
These costs are set out in note 4.
Key Performance Indicators
The Board of Sceptre Leisure plc monitors a range of financial
and non-financial performance indicators to measure performance
against expected targets.
During the course of the year, it became clear that one of these
measures, machine week average (MWA), required restatement to
enable meaningful comparisons with the previous year. In the past,
this measure included royalty charges which were paid out directly
to pub companies. In addition the figure also included contribution
from the FOBT operation. Finally, the previous measure of machine
week average (MWA) was calculated on a one-week snapshot at the end
of the period under review.
We have therefore amended the way we calculate this KPI to allow
a better comparison of like-for-like performance over time. The
measure now uses adjusted average machine numbers and income levels
over a six-month reporting period, and reflects only net machine
revenue charged by Sceptre Leisure Solutions.
A summary of the KPIs together with comparatives from the prior
year are as follows:
Financial 2011 2010
------------------------------------ --------- ---------
1. Earnings per share
before exceptional
items 2.0p 4.1p
------------------------------------ --------- ---------
2. EBITDA GBP12.2m GBP13.8m
------------------------------------ --------- ---------
Non-financial
------------------------------------ --------- ---------
3. Machine numbers 22,500 21,300
------------------------------------ --------- ---------
4. Machine week average GBP25.47 GBP25.83
------------------------------------ --------- ---------
5. Pieces/personnel
ratio 49 47
------------------------------------ --------- ---------
6. Asset utilisation 95% 95%
------------------------------------ --------- ---------
Financing
Net debt decreased to GBP13.4m from GBP15.9m as at 30 April
2010. This decrease was due to the repayment of the term loan with
LBG and the loan note with Crown Leisure.
On 28 June 2011, Sceptre Leisure Plc agreed new facilities with
Lloyds Banking Group. GBP3.75m of the outstanding balance on the
revolving credit facility at 30 April 2011 was added to the
outstanding term loan (also GBP3.75m at the same date) and combined
into a new term loan of GBP7.5m repayable over three years to April
2014. In addition, Lloyds Banking Group continues to provide a
GBP500,000 working capital facility to the Group, which will next
be reviewed in June 2012.
Financial risk treasury management
The majority of the Group's borrowings are fixed through a
combination of fixed rate securitised debt and interest rate swaps.
The banking and covenants are reviewed throughout the year as part
of the internal reporting process with a focus on ensuring
appropriate headroom is available.
Interest rate risk
The Group uses an interest rate collar to manage its exposure to
interest rate movements on its bank borrowings. Contracts covering
notional amounts equivalent to the old term loan of GBP3.75m
restrict interest payments at rates between 4.7% and 5.75% over the
life of the loan. The fair value of the collar at the reporting
date is reflected in the Group balance sheet under the derivative
financial instrument heading.
Currency rate risk
The Group buys currency at spot rate. There are few transactions
in foreign currencies, and therefore the Group's exposure to
foreign exchange risk is considered to be low. The Group would look
to minimise any increased exposure to foreign exchange through the
use of currency instruments if appropriate.
Liquidity risk
The Group's approach to managing liquidity is to ensure, as far
as possible, that it has sufficient liquidity to meet liabilities
as they fall due with surplus facilities to cope with any
unexpected variances in timing of cash flows. At 30 April 2011, the
Group had undrawn borrowing facilities of GBP3.1m (2010: GBP1.3m)
of which GBP3.1m (2010: 1.3m) were uncommitted. In addition to
undrawn borrowing facilities, as at 30 April 2011 the Group held on
deposit cash of GBP1.4m (2010: GBP4.2m).
Taxation
The effective tax rate for the year was 12.5% (2010: 15.3%).
This rate is lower than the UK mainstream corporation tax rate of
28% due to a change in the deferred tax rate and the effect of the
recognition of a gain on bargain purchase.
Mark White
Finance Director
26 July 2011
Consolidated statement of comprehensive income
for the year ended 30 April 2011
30 April 30 April
2011 2010
Continuing operations Note GBP000 GBP000
--------------------------------------------------- ---- -------- --------
Revenue 2,3 38,627 42,808
Direct costs (26,683) (29,498)
--------------------------------------------------- ---- -------- --------
Gross profit 3 11,944 13,310
Distribution costs (37) (93)
Administrative expenses - normal (9,477) (9,748)
Administrative expenses - exceptional items 4 375 (803)
(Loss) / profit on disposal of property, plant
and equipment and intangible assets (59) 535
--------------------------------------------------- ---- -------- --------
Operating profit 3 2,746 3,201
--------------------------------------------------- ---- -------- --------
Operating profit before exceptional items 2,371 4,004
Exceptional items 4 375 (803)
--------------------------------------------------- ---- -------- --------
Finance income 170 124
Finance costs (1,276) (1,414)
--------------------------------------------------- ---- -------- --------
Net finance expense (1,106) (1,290)
--------------------------------------------------- ---- -------- --------
Profit before taxation 1,640 1,911
Tax expense 5 (205) (293)
--------------------------------------------------- ---- -------- --------
Profit and total comprehensive income for the
financial year 1,435 1,618
--------------------------------------------------- ---- -------- --------
Profit and total comprehensive income attributable
to:
- Equity holders of the parent 1,413 1,587
- Non-controlling interest 22 31
--------------------------------------------------- ---- -------- --------
1,435 1,618
--------------------------------------------------- ---- -------- --------
Earnings per Ordinary Share
- Basic 6 2.5p 3.0p
--------------------------------------------------- ---- -------- --------
- Diluted 6 2.4p 2.8p
--------------------------------------------------- ---- -------- --------
Consolidated balance sheet
at 30 April 2011
30 April 30 April
2011 2010
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------- -------- ---------- --------
Assets
Non-current assets
Intangible assets 6,231 5,675
Property, plant and equipment 27,302 26,975
Total non-current assets 33,533 32,650
Current assets
Inventories 1,306 1,276
Trade and other receivables 5,266 5,771
Cash and cash equivalents 1,366 4,163
--------------------------------------- ------- -------- ---------- --------
Total current assets 7,938 11,210
--------------------------------------- ------- -------- ---------- --------
Total assets 41,471 43,860
--------------------------------------- ------- -------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (7,722) (7,533)
Corporation tax (52) (612)
Interest bearing loans and borrowings (8,373) (7,887)
--------------------------------------- ------- -------- ---------- --------
Total current liabilities (16,147) (16,032)
Non-current liabilities
Trade and other payables (1,289) (130)
Interest bearing loans and borrowings (6,404) (12,193)
Deferred taxation (2,502) (1,976)
Derivative financial instruments (120) (290)
--------------------------------------- ------- -------- ---------- --------
Total non-current liabilities (10,315) (14,589)
--------------------------------------- ------- -------- ---------- --------
Total liabilities (26,462) (30,621)
--------------------------------------- ------- -------- ---------- --------
Net assets 15,009 13,239
--------------------------------------- ------- -------- ---------- --------
Equity
Share capital 5,466 5,394
Share premium account 5,168 4,840
Merger reserve (2,232) (2,232)
Retained earnings 6,514 5,166
--------------------------------------- ------- -------- ---------- --------
Equity attributable to equity holders
of the parent 14,916 13,168
Non-controlling interest 93 71
--------------------------------------- ------- -------- ---------- --------
Total equity 15,009 13,239
--------------------------------------- ------- -------- ---------- --------
These financial statements were approved and authorised for
issue by the Board of Directors on 26 July 2011 and were signed on
its behalf by:
Kenneth Turner Director Sceptre Leisure Plc Company no:
03189747
Consolidated statement of cash flows
for the year ended 30 April 2011
30 April 30 April
2011 2010
Note GBP000 GBP000 GBP000 GBP000
----------------------------------- ---- ------- ------- -------- -------
Cash flows from operating
activities
Profit before taxation 1,640 1,911
Adjustments for:
Depreciation 9,047 9,344
Amortisation 672 372
Recognition of gain on bargain
purchase 7 (670) (225)
Impairment of intangible assets
(brand names) 49 227
Equity-settled share options 97 131
Loss / (profit) on disposal
of property, plant and equipment
and intangible assets 59 (535)
Finance gain on derivative
financial instruments (170) (124)
Finance costs 1,276 1,414
----------------------------------- ---- ------- ------- -------- -------
Cash flows from operating
activities before changes
in working capital 12,000 12,515
Changes in working capital:
Increase in inventories (30) (180)
Decrease / (increase) in trade
and other receivables 505 (946)
Increase / (decrease) in trade
and other payables 1,348 (2,612)
----------------------------------- ---- ------- ------- -------- -------
Cash generated from operations 13,823 8,777
Finance costs (1,276) (1,414)
Income tax paid (622) (250)
----------------------------------- ---- ------- ------- -------- -------
Net cash from operating activities 11,925 7,113
Cash flows from investing
activities
Purchase of business net of
cash acquired (800) (996)
Purchase of property, plant
and equipment (9,002) (12,389)
Sale of property, plant and
equipment and intangible assets 383 4,557
----------------------------------- ---- ------- ------- -------- -------
Net cash used in investing
activities (9,419) (8,828)
Cash flows from financing
activities
Movement in bank loans and
loan notes (3,200) (2,775)
Revolving credit facility
(repayments) / drawdowns (2,200) 5,999
Net finance lease rental
drawdowns/(payments) 567 (1,576)
Equity dividends paid - (100)
New shares issued - 5,497
----------------------------------- ---- ------- ------- -------- -------
Net cash (used in)/generated
from financing activities (4,833) 7,045
----------------------------------- ---- ------- ------- -------- -------
Net (decrease) / increase
in cash and cash equivalents (2,327) 5,330
Cash and cash equivalents
at start of period 3,693 (1,637)
----------------------------------- ---- ------- ------- -------- -------
Cash and cash equivalents
at end of period 1,366 3,693
----------------------------------- ---- ------- ------- -------- -------
Consolidated statement of changes in equity
At 30 April 2011
Equity
attributable
Share to equity Non-
Share premium Merger Retained holders of controlling Total
capital account reserve earnings the parent interest equity
30 April 2010 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- -------- ------------ ----------- ------
At 1 May 2009 4,554 173 (2,332) 3,485 5,880 40 5,920
Net proceeds
from the
issue of
Ordinary
Shares 830 4,667 - - 5,497 - 5,497
Shares issued
on the
acquisition
of Australian
8 Ball
Company
Limited 10 - 100 - 110 - 110
Employee
share-based
payments - - - 131 131 - 131
Taxation
effect of
employee
share-based
payment - - - (37) (37) - (37)
-------------- ------- ------- ------- -------- ------------ ----------- ------
Transactions
with owners 840 4,667 100 94 5,701 - 5,701
-------------- ------- ------- ------- -------- ------------ ----------- ------
Profit for the
financial
year and
total
comprehensive
income - - - 1,587 1,587 31 1,618
-------------- ------- ------- ------- -------- ------------ ----------- ------
At 30 April
2010 5,394 4,840 (2,232) 5,166 13,168 71 13,239
-------------- ------- ------- ------- -------- ------------ ----------- ------
Equity
attributable
Share to equity Non-
Share premium Merger Retained holders of controlling Total
capital account reserve earnings the parent interest equity
30 April 2011 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- -------- ------------ ----------- ------
At 1 May 2010 5,394 4,840 (2,232) 5,166 13,168 71 13,239
Shares issued
on the
acquisition
of the trade
and assets of
RV Smith
(Leisure)
Limited 72 328 - - 400 - 400
Employee
share-based
payments - - - 97 97 - 97
Taxation
effect of
employee
share-based
payment - - - (162) (162) - (162)
-------------- ------- ------- ------- -------- ------------ ----------- ------
Transactions
with owners 72 328 - (65) 335 - 335
-------------- ------- ------- ------- -------- ------------ ----------- ------
Profit for the
financial
year and
total
comprehensive
income - - - 1,413 1,413 22 1,435
-------------- ------- ------- ------- -------- ------------ ----------- ------
At 30 April
2011 5,466 5,168 (2,232) 6,514 14,916 93 15,009
-------------- ------- ------- ------- -------- ------------ ----------- ------
Notes
1 Basis of preparation
The financial information has been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the EU ('Adopted IFRSs').
The financial information set out in this announcement does not
constitute the Group's statutory accounts, as defined in Section
435 of the Companies Act 2006, for the years ended 30 April 2011 or
30 April 2010, but is derived from the 2011 Annual Report that was
authorised for issue by the Board of Directors on 26 July 2011.
Statutory accounts for 2010 have been delivered to the Registrar of
Companies and those for 2011 will be delivered in due course. The
auditors have reported on those accounts; their reports were
unqualified.
Going concern
The Group meets its day-to-day working capital requirements from
a bank loan, and overdraft facility, together with revolving credit
and asset finance facilities from various providers. The majority
of the Group's banking facilities remain available to the Group
until 2014.The current economic conditions create uncertainty
particularly over (a) the level of demand for the Group's products
and services; and (b) the availability of bank and asset finance in
the foreseeable future.
The Directors have prepared trading and cash flow forecasts to
30 April 2013. The forecasts make assumptions in respect of future
trading conditions and in particular the Directors' estimates of
number of machines operated and the income derived therefrom. The
forecasts take into account the amended facilities agreed with
Lloyds Banking Group on 28 June 2011, which had the effect of
deferring the repayment date of the revolving credit facility
originally due in June 2012, by combining the existing term loan
and increasing the repayment period to April 2014.
Taking into account sensitivities in relation to income derived
from the number of machines operated, reduction in cost base and
covenant compliance, the prepared forecasts suggest that the Group
retains sufficient headroom within the revised facilities that are
available to it for a period in excess of one year from the date of
approval of these financial statements.
After making enquiries, and considering the uncertainties
described above, the Directors have a reasonable expectation that
the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the annual
report and financial statements.
2 Revenue
30 April 30 April
2011 2010
Revenue GBP000 GBP000
-------------------------------------------- -------- --------
Equipment sales 370 377
Machine rental 35,013 38,755
Sale of lottery, indoor gaming, and leisure
products 3,244 3,676
-------------------------------------------- -------- --------
Total revenues 38,627 42,808
-------------------------------------------- -------- --------
3 Segmental report
The accounting policy for identifying segments is based on
internal management reporting information that is regularly
reviewed by the chief operating decision maker (The Board of
Directors). The Board of Directors manages the Group in three
business segments:
-- machine sales and rental (Sceptre Leisure Solutions);
-- the sale of lottery, indoor gaming and other products
(Lotteryking, Kelly's Eye and Party House); and
-- the operation of lotteries on behalf of charities (Creative
Lotteries).
During the periods under review, over 90% of the Group's
activities related to machine sales and rental, and therefore the
remaining segments are not reportable as they do not meet the
quantitative thresholds. They have been combined and disclosed as
'all other segments'.
All revenue reported in the period under review arose within the
United Kingdom.
Segment performance is monitored monthly as part of the
management reporting process. The financial performance for each
segment is analysed and consolidation adjustments to reach the
Group results are shown separately.
Machine Machine
sales sales
and Central 2011 and Central 2010
rental Other corporate Group rental Other Corporate Group
Segmental
analysis GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- ------- --------- -------- -------- ------- --------- --------
External
revenue 35,383 3,244 - 38,627 39,132 3,676 - 42,808
Inter-segment
revenue - - - - - - - -
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Net revenue 35,383 3,244 - 38,627 39,132 3,676 - 42,808
Gross profit 10,058 1,886 - 11,944 11,060 2,250 - 13,310
Operating
profit/(loss) 3,888 (204) (938) 2,746 5,080 (978) (901) 3,201
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Segment assets 35,140 6,266 65 41,471 38,750 4,986 124 43,860
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Segment
liabilities (20,736) (1,757) (3,969) (26,462) (23,066) (1,325) (6,230) (30,621)
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Other segment
information:
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Capital
expenditure 8,846 156 - 9,002 11,541 848 - 12,389
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Intangible
assets -
additions 1,277 - - 1,277 1,546 - - 1,546
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Depreciation 8,720 327 - 9,047 9,015 329 - 9,344
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Amortisation 524 148 - 672 249 123 - 372
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Interest
expense 1,276 - - 1,276 1,404 10 - 1,414
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Impairment - 49 - 49 - 227 - 227
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Equity-settled
share options 49 9 39 97 59 27 45 131
--------------- -------- ------- --------- -------- -------- ------- --------- --------
Finance gain on
derivative
financial
instruments (170) - - (170) (124) - - (124)
--------------- -------- ------- --------- -------- -------- ------- --------- --------
During the year, two customers contributed more than 10% of
Group revenues, both within the 'machine sales and rental'
segment:
Customer A - revenue GBP6.1m (15.9%) (2010: GBP6.6m, 15.5%);
Customer B - revenue GBP5.7m (14.9%) (2010: GBP6.3m, 14.8%)
4 Exceptional items
30 April 30 April
2011 2010
GBP000 GBP000
---------------------------------------------------------- -------- --------
Restructuring and redundancy 132 195
Provision for rentals and business rates on onerous leases - 452
Impairment of intangible assets - brands 49 227
Recognition of gain on bargain purchase (670) (225)
Professional and financial expenses relating to corporate
restructuring 114 154
---------------------------------------------------------- -------- --------
Exceptional items (credit)/cost (375) 803
---------------------------------------------------------- -------- --------
5 Taxation
30 April 30 April
2011 2010
-------------- -------------
Recognised in the statement of
comprehensive income GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------ ------ --------- ------
Current tax expense:
Current year 56 863
Adjustments for prior years 6 (1,158)
------------------------------------------- ------ ------ --------- ------
Current tax expense 62 (295)
Deferred tax expense:
Origination and reversal of temporary
differences 144 (365)
Adjustments in respect of previous years (1) 953
Deferred tax expense 143 588
------------------------------------------- ------ ------ --------- ------
Total tax expense 205 293
------------------------------------------- ------ ------ --------- ------
30 April 30 April
2011 2010
GBP000 GBP000
-------- --------
Reconciliation of effective tax rate
----------------------------------------------- -------- --------
Profit before tax 1,640 1,911
----------------------------------------------- -------- --------
Profit before tax multiplied by standard rate
of corporation tax in the UK of 27.84% (2010:
28%) 457 535
Effects of:
Expenses not deductible for tax purposes 115 61
Income not taxable (193) (63)
Adjustments in respect of previous years 5 (205)
Movement in unrecognised deferred tax assets (5) (34)
Rate change (167) -
Small company relief (7) (1)
----------------------------------------------- -------- --------
Total tax expense 205 293
----------------------------------------------- -------- --------
The above tax rate change represents a change in the level of
deferred tax from 28% to 26%.6
Dividends
The Directors do not recommend the payment of a dividend in
respect of the current year.
6 Earnings per Ordinary Share
The calculations of earnings per share are based on the
following profits and number of shares:
Basic Diluted Basic Diluted
30 April 30 April 30 April 30 April
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- --------- --------- ---------
Profit for the financial year 1,413 1,413 1,587 1,587
Additional disclosures:
Exceptional administrative
(credits)/expense (375) (375) 803 803
Taxation effect of exceptional
administrative expenses 98 98 (225) (225)
---------------------------------- --------- --------- --------- ---------
Profit for the financial year
before exceptional expenses 1,136 1,136 2,165 2,165
---------------------------------- --------- --------- --------- ---------
30 April
30 April 2010
2011 Number
Number of of
Shares shares
---------- ----------
Weighted average number of shares
For basic earnings per share 56,150,853 52,426,333
Share options 3,936,554 3,617,694
For diluted earnings per share 60,087,407 56,044,027
---------------------------------- ---------- ----------
The Group's earnings per share are as follows:
30 April 30 April
2011 2010
pence pence
-------- --------
- Basic 2.5 3.0
-------------------------------------- -------- --------
- Diluted 2.4 2.8
-------------------------------------- -------- --------
- Basic before exceptional expenses 2.0 4.1
-------------------------------------- -------- --------
- Diluted before exceptional expenses 1.9 3.9
-------------------------------------- -------- --------
The total number of shares in issue at 30 April 2011 was
56,989,585.
7 Acquisitions
Acquisition of the Trade and Assets of RV Smith (Leisure)
Limited
On 29 November 2010, the Group acquired the trade and assets of
RV Smith (Leisure) Limited in a cash and shares transaction. The
shares were issued at the market price on the day of
completion.
Fair value
at date of
acquisition
GBP000
------------------------------------------------------- ------------
Cash 800
Shares in Sceptre Leisure plc (1,444,043 Ordinary
Shares of 5p each issued at 27.7p being market price) 400
------------------------------------------------------- ------------
Total consideration 1,200
------------------------------------------------------- ------------
Initial
book Fair value
value at at date
date Fair value of
of acquisition adjustment acquisition
GBP000 GBP000 GBP000
---------------------------------- --------------- ----------- ------------
Intangible assets (note 12) - 1,277 1,277
Property, plant and equipment 829 - 829
Total assets 829 1,277 2,106
---------------------------------- --------------- ----------- ------------
Deferred taxation - (236) (236)
---------------------------------- --------------- ----------- ------------
Total liabilities - (236) (236)
---------------------------------- --------------- ----------- ------------
Net assets 829 1,041 1,870
---------------------------------- --------------- ----------- ------------
Fair value of consideration paid 1,200
Gain on bargain purchase -
recognised in exceptional items
within profit or loss (670)
---------------------------------- --------------- ----------- ------------
Owing to the immediate and successful integration of the RV
Smith assets into Sceptre Leisure Solutions, it is not possible to
determine the profit attributable to the acquisition in the
financial year, nor is it possible to calculate the profit that
would have been generated had the acquisition been made on 1 May
2010.
Fair value adjustment
Under IFRS 3 at the date of acquisition a value has been applied
to identifiable intangible assets that would otherwise have been
consumed within goodwill. The fair value adjustment to intangible
assets relates to the value of acquired customer contracts and
related relationships and is being amortised over five years as
management consider that the customer contracts and relationships
acquired in the RV Smith (Leisure) Limited acquisition have an
estimated useful economic life of that length. This was derived
from a review of the historical length of supply for all major
customers, adjusted to take into account those with whom the Group
already had a trading relationship. Where a trading relationship
with a major customer of RV Smith (Leisure) Limited was already in
existence, the customer in question was assessed as being
equivalent to a non-contractual relationship. The overall value of
customer contracts and relationships acquired created a gain on
bargain purchase amount of GBP670,000, which was recognised
immediately as profit in accordance with the Group's accounting
policies. Negative goodwill is included in exceptional
administrative expenses in the statement of comprehensive income.
The fair value adjustment to deferred taxation relates to the
recognition of the customer contracts and related relationships
asset. The primary reason for the business combination was to
further strengthen the Group's position in the south of the UK.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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