Interim Results
Esporta PLC
11 August 2000
ESPORTA plc
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2000
Esporta plc, one of the UK's leading operators of health and fitness
clubs, announces its interim results for the six months to 30 June
2000.
Financial Highlights
* Turnover up 25% to £38.5m (H1 1999: £30.9m before
exceptional income)
* EBITDA up 48% to £9.9m (H1 1999: £6.7m before
exceptional items)
* Operating Profit margins increased to 14% (H1 1999 11%
before exceptional items)
* Profit before tax up 73% to £4.5m (H1 1999: £2.6m)
* Earnings per share up 93% to 2.12p (H1 1999: 1.10p)
* Interim dividend of 0.45p per share
Operational Highlights
* Membership numbers up 22% to 126,000
* New openings to total seven by year end - seven more
contracted for 2001
* Still on target for 46 clubs by end 2002
* Eden concept launched to segment premium end of the
market
John Grieves, Chairman, said:
'The business made good progress over the last six months in
establishing the infrastructure and culture that we believe will
differentiate Esporta in the UK marketplace. Revenues in the last
month have continued the trends seen in the first half, and we have
seen an improvement in both membership recruitment and retention.
'The majority of our new members are joining a health club for the
first time which confirms our view that there is considerable
unfulfilled demand for our premium product. We believe that the
proportion of the population using health clubs and the amount they
are prepared to spend will continue to increase over the longer
term.'
Enquiries:
Esporta plc Brunswick Group Limited
Graham Coles, Chief Executive Kathy Hannaford
Mark Beadle, Finance Director William Cullum
0207 404 5959 today 0207 404 5959
0118 912 3503 thereafter
Chairman's Statement
I am pleased to present Esporta's first interim report following its
listing on The London Stock Exchange on 1 February 2000. The
business made good progress over the six months to 30 June 2000, and
this has continued into the second half.
Results
Turnover for the first half was £38.5m (1999: £30.9m excluding
exceptional income of £1.9m), representing an increase of 25%.
Revenues for clubs opened in 1999 and prior years have grown by 5%
in the first six months of the year. Revenues for clubs opened in
1999 grew by 23% on a comparable basis. Oxford, Edinburgh and
Northampton which opened in 2000 are performing well.
Operating profit rose by 62% to £5.5m (1999: £3.4m excluding
exceptional profits). The interest charge of £1m (1999: £2.3m) was
significantly down on last year due to the capitalisation of inter-
company debt as part of the restructuring of First Leisure
Corporation PLC and the formation of Esporta plc.
Pre-tax profits were up 73% at £4.5m, with earnings per share,
following a moderate increase in the tax rate to 22% (1999: 19%), up
93% to 2.12p on an FRS 14 basis.
Our balance sheet remains strong, with net assets of £125.6m, net
borrowings of £30.9m against committed facilities of £100m and
gearing of 25%.
The Board has declared a dividend in respect of the first six months
of 0.45p per share to be paid on 11 October 2000 to shareholders on
the register on 15 September 2000.
Members
Total membership of our clubs at 30 June 2000 stood at 126,000, an
increase of 22% year on year. Of these 94,000 were adults (June
1999: 77,000).
Our clubs have a relaxed, comfortable and child-friendly atmosphere
and their membership reflects this. Some 75% of our adult members
have joined as couples or in families. Their average age is 34 and
55% of them are women.
The majority of our new members are joining a health club for the
first time and this confirms our view that there is considerable
unfulfilled demand for our premium product. We believe that the
proportion of the population using health clubs, and the amount that
they are prepared to spend, will continue to increase over the
longer term.
New Developments
We opened three new Esporta clubs during the period. Our first Eden
club opened at the beginning of this month in Chislehurst, taking
our overall estate to 26 clubs. Eden represents an opportunity to
attract those who seek a luxurious, tranquil and child-free
environment.
Our new clubs continue to open on time and within budget. Six
further sites are under construction with Enfield, Friern Barnet and
Lichfield due to open before the end of the year, and Wolverhampton,
Repton Park (near Chigwell) and Chiswick Park due to open in the
first half of 2001. There are four further sites conditionally
contracted and scheduled to open in 2001.
We believe that the availability of sites for new health clubs will
enable us to meet our target of doubling the size of the estate over
the three-year period to the end of 2002.
Board Changes
Mark Beadle joined the Board as Finance Director at the beginning of
April. Mark started his career with Price Waterhouse in London, and
spent four years as European Finance Director for Planet Hollywood
before joining us.
As announced in July, Patrick Henchoz, our Managing Director, will
be leaving the Company at the end of the year to travel with his
family. He leaves Esporta well-positioned to continue its rapid
growth, and we wish him well.
Douglas Waddell, currently UK Operations Director at Queens Moat
Houses plc, will join the Board at the beginning of November as
Operations Director.
Douglas has spent 15 years in general and operational management at
Queens Moat Houses. Prior to his current position he was
responsible for developing and managing their health and fitness
clubs. We are extremely pleased to have secured Douglas's services
and are confident that with his energy, experience in the service
sector, and the support of our strong operational management team,
he will continue the progress we have made to date.
Current Trading
Revenues in the first few weeks of the second half have continued
the trends seen in the first half. Sales in clubs opened in 1998
and prior years have grown by 5% on a comparable basis. Good
progress was made in July on both membership recruitment and
membership retention.
Prospects
The Health and Fitness market is showing very rapid growth, and we
believe that this growth is set to continue. We are confident that
our organic development programme, supported by our financial
capacity and our management strengths, will enable the full
potential benefits of this market growth to be realised.
Our business is focused on improving membership loyalty and
increasing spend per head, a focus which is reflected in incentive
schemes for all of our staff. We have reinforced our commitment to
service with a strict operating standards programme which was
implemented during the period to promote consistent delivery of our
product.
Conclusion
I am pleased with all that Esporta has achieved since flotation -
our sales and profits continue to grow, the returns on our older
units are maturing in line with expectations and our new units are
performing well. We have made significant progress in establishing
the infrastructure and culture that we believe will differentiate
Esporta in the UK marketplace.
Our objective is to provide premium facilities and service to our
members, enjoyable and fulfilling jobs for our staff and strong
returns for our shareholders. We look to the future with
confidence.
John Grieves
Chairman
11 August 2000
Consolidated profit and loss account (unaudited)
6 Before Exceptional 6 months
months Exceptional items to
to items 30.06.1999 30.06.1999
30.06.2000 30.06.1999
Note £m £m £m £m
______________ ____ __________ ___________ ___________ __________
Turnover 38.5 30.9 1.9 32.8
Cost of sales (30.0) (24.2) (0.4) (24.6)
______________ ____ __________ ___________ ___________ __________
Gross profit 8.5 6.7 1.5 8.2
Administrative
expenses (3.0) (3.3) - (3.3)
______________ ____ __________ ___________ ___________ __________
Operating
profit 5.5 3.4 1.5 4.9
______________ ____ __________ ___________ ___________ __________
EBITDA 9.9 6.7 1.5 8.2
Depreciation (4.4) (3.3) - (3.3)
______________ ____ __________ ___________ ___________ __________
Operating
profit 5.5 3.4 1.5 4.9
______________ ____ __________ ___________ ___________ __________
Net interest
payable and
similar
charges (1.0) (2.3)
______________ ____ __________ ___________ ___________ __________
Profit on
ordinary
activities
before
taxation 4.5 2.6
Tax on profit
on ordinary
activities 4 (1.0) (0.5)
______________ ____ __________ ___________ ___________ __________
Profit on
ordinary
activities
after
taxation 3.5 2.1
Equity
minority
interests - (0.3)
______________ ____ __________ ___________ ___________ __________
Profit for the
financial 3.5 1.8
period
Dividends (1.9) -
Retained
profit for
the financial
period 1.6 1.8
______________ ____ __________ ___________ ___________ __________
Basic and
diluted
earnings per
ordinary
share
(FRS 14) 6 2.12p 1.10p
Basic and
diluted
headline
earnings per
ordinary
share (IIMR) 6 2.12p 1.10p
Basic and
diluted
headline
earnings per
ordinary
share before
exceptional
items 6 2.12p 0.46p
______________ ____ __________ ___________ ___________ __________
6 Before Exceptional Year to
months Exceptional items 31.12.1999
to items 31.12.1999
30.06.2000 31.12.1999
Note £m £m £m £m
______________ ____ __________ ___________ ___________ __________
Turnover 38.5 64.0 3.9 67.9
Cost of sales (30.0) (48.6) (1.9) (50.5)
______________ ____ __________ ___________ ___________ __________
Gross profit 8.5 15.4 2.0 17.4
Administrative
expenses (3.0) (6.4) (1.0) (7.4)
______________ ____ __________ ___________ ___________ __________
Operating
profit 5.5 9.0 1.0 10.0
______________ ____ __________ ___________ ___________ __________
EBITDA 9.9 16.1 2.1 18.2
Depreciation (4.4) (7.1) (1.1) (8.2)
______________ ____ __________ ___________ ___________ __________
Operating
profit 5.5 9.0 1.0 10.0
______________ ____ __________ ___________ ___________ __________
Net interest
payable and
similar
charges (1.0) (3.8)
______________ ____ __________ ___________ ___________ __________
Profit on
ordinary
activities
before
taxation 4.5 6.2
Tax on profit
on ordinary
activities 4 (1.0) (1.2)
______________ ____ __________ ___________ ___________ __________
Profit on
ordinary
activities
after
taxation 3.5 5.0
Equity
minority
interests - (0.3)
______________ ____ __________ ___________ ___________ __________
Profit for the
financial
period 3.5 4.7
Dividends (1.9) -
Retained
profit for
the financial
period 1.6 4.7
______________ ____ __________ ___________ ___________ __________
Basic and
diluted
earnings per
ordinary
share
(FRS 14) 6 2.12p 2.83p
Basic and
diluted
headline
earnings per
ordinary
share (IIMR) 6 2.12p 3.49p
Basic and
diluted
headline
earnings per
ordinary
share
before
exceptional 6 2.12p 2.63p
items
______________ ____ __________ ___________ ___________ __________
Note: EBITDA - Earnings before interest, tax, depreciation and
amortisation.
Consolidated cash flow statement (unaudited)
6 months 6 months to Year to
to 30.06.1999 31.12.1999
30.06.2000
Note £m £m £m
___________________ ____ __________ ____________ ____________
Net cash inflow
from operating
activities 7 5.5 10.1 23.0
___________________ ____ __________ ____________ ____________
Return on
investments and
servicing of
finance
Interest received 0.5 0.3 0.7
Interest paid (2.0) (2.7) (4.8)
___________________ ____ __________ __________ ____________
(1.5) (2.4) (4.1)
___________________ ____ __________ ____________ _____________
Taxation (0.2) (0.3) (1.3)
Capital expenditure
Purchase of
tangible fixed
assets (12.4) (16.7) (31.6)
Sale of tangible
fixed assets 0.7 - -
___________________ ____ __________ ____________ ___________
_
(11.7) (16.7) (31.6)
___________________ ____ __________ ____________ ____________
Equity dividends
paid (1.2) - -
___________________ ____ __________ ____________ ____________
Net cash outflow
before financing (9.1) (9.3) (14.0)
Financing
New loans - 34.9 38.3
Repayment of loans (4.3) - -
Repayment of inter-
company loans - (21.6) (21.6)
___________________ ____ __________ ____________ ____________
(4.3) 13.3 16.7
___________________ ____ __________ ____________ ____________
(Decrease)/increase
in cash in the
period 8 (13.4) 4.0 2.7
__________________ ___ ________ _________ ___________
Reconciliation of net cash flow to movement in net debt
6 months 6 months to Year to
to 30.06.1999 31.12.1999
30.06.2000
Note £m £m £m
___________________ ____ __________ ____________ ____________
(Decrease)/increase
in cash in the
period (13.4) 4.0 2.7
Cash
outflow/(inflow)
from increase in
debt 4.3 (13.3) (16.7)
___________________ ____ __________ ____________ ____________
Movement in net
debt resulting
from cash flows (9.1) (9.3) (14.0)
Net debt at
beginning of
period (21.8) (7.8) (7.8)
___________________ ____ __________ ____________ ____________
Net debt at end of
period 8 (30.9) (17.1) (21.8)
___________________ ____ __________ ____________ ____________
Consolidated balance sheet (unaudited)
30.06.2000 30.06.1999 31.12.1999
£m £m £m
___________________ ___ ___________ ____________ ____________
Fixed assets
Tangible assets 173.5 155.1 166.2
___________________ ___ ___________ ____________ ____________
173.5 155.1 166.2
Current assets
Stocks 0.6 0.4 0.6
Debtors 5.4 3.6 5.8
Cash at bank and in
hand 7.6 17.8 16.5
___________________ ___ ___________ ____________ ____________
13.6 21.8 22.9
Creditors: amounts
falling due within
one year (26.1) (18.3) (25.9)
___________________ ___ ___________ ____________ ____________
Net current
(liabilities)/asset
s (12.5) 3.5 (3.0)
Debtors: amounts
falling due after
one year 0.9 - 1.5
___________________ ___ ___________ ____________ ____________
Total assets less
current liabilities
161.9 158.6 164.7
Creditors: amounts
falling due after
more than one year (36.3) (37.5) (40.7)
___________________ ___ ___________ ____________ ____________
Net assets 125.6 121.1 124.0
___________________ ___ ___________ ____________ ____________
Capital and reserves
Called up share
capital 41.5 41.5 41.5
Merger reserve 70.0 70.0 70.0
Profit and loss
account 14.1 9.6 12.5
___________________ ___ ___________ ____________ ____________
Equity Shareholders'
funds
125.6 121.1 124.0
___________________ ___ ___________ ____________ ____________
Reconciliation of movement in Shareholders' funds
6 months 6 months to Year to
to 30.06.1999 31.12.1999
30.06.2000
£m £m £m
__________________________ __________ ___________ ____________
Profit for the financial 1.6 1.8 4.7
period
Acquisition of minority - 14.9 14.9
interests
__________________________ __________ ___________ ____________
Net movement in
Shareholders' funds 1.6 16.7 19.6
Opening Shareholders'
funds 124.0 104.4 104.4
__________________________ __________ __________ ____________
Closing Shareholders'
funds 125.6 121.1 124.0
__________________________ __________ __________ ____________
Notes
(forming part of the financial statements)
1. Principal accounting policies
The interim report has been prepared using accounting policies
consistent with those adopted by the Group in its pro forma
financial statements for the year ended 31 December 1999.
2. Segmental information
Throughout the period the Esporta Group operated solely within
the health & fitness market in the UK.
3. Exceptional items
Turnover and operating profit for the six months to 30 June
1999 included £1.9m and £1.5m respectively reported as
exceptional, principally relating to membership and joining
fee income for certain clubs which, as a result of the legal
structure of those clubs, was exempt from VAT. Customs and
Excise introduced legislation, from 1 January 2000, which has
rendered such income subject to VAT. The Directors believed
that the resulting VAT charge could not be passed on to club
members and therefore that this element of income was not
sustainable.
4. Tax on profit on ordinary activities
The taxation charge for the six months to 30 June 2000 is
based on an estimate of the Group's effective rate of taxation
for the current year of 22%. The effective rate of taxation
for the year to 31 December 1999, after adjusting for the
effect of exceptional items, was 10%.
The difference compared to the mainstream corporation tax rate
of 30% is principally due to capital allowances in excess of
depreciation. This timing difference is not expected to
reverse in the foreseeable future and therefore no provision
has been made for deferred taxation.
5. Dividend
A first interim dividend of 0.7p per share was paid to
shareholders on 21 April 2000. A second interim dividend of
0.45p per share will be paid on 11 October 2000 to
shareholders on the register at close of business on 15
September 2000.
6. Earnings per ordinary share
The calculation of basic earnings per share is based on profit
after tax and minority interests divided by the weighted
average number of shares in issue.
Headline earnings per ordinary share, as based on the
recommendations of the Institute of Investment Management and
Research (IIMR), is stated below.
Headline earnings per share excluding exceptional items is
presented in order to give a better indication of the
underlying performance of the Group. This measure is
calculated by using earnings before exceptional items and
adjusting for the tax effect of these transactions or charges.
6 months to 6 months to Year to
30.06.2000 30.06.1999 31.12.1999
Profit EPS Profit EPS Profit EPS
£m pence £m pence £m pence
_______________ ______ _____ ______ _____ ______ _____
Basic earnings
per ordinary
share (FRS 14) 3.5 2.12 1.8 1.10 4.7 2.83
Add back: asset
impairments - - - - 1.1 0.66
_______________ ______ _____ ______ _____ ______ _____
Headline
earnings per
ordinary share
(IIMR) 3.5 2.12 1.8 1.10 5.8 3.49
Deduct:
Profit from
other
exceptional
items - - (1.5) (0.92) (2.1) (1.26)
Tax effect of
other
exceptional
items - - 0.5 0.28 0.7 0.40
_______________ ______ _____ ______ _____ ______ _____
Headline
earnings per
ordinary share
excluding
exceptional
items 3.5 2.12 0.8 0.46 4.4 2.63
=============== ====== ===== ====== ===== ====== =====
7. Reconciliation of operating profit to net cash inflow from
operating activities
6 months 6 months to Year to
to 30.06.1999 31.12.1999
30.06.2000
£m £m £m
______________________ __________ ___________ __________
Operating profit 5.5 4.9 10.0
Depreciation and other
amounts written off
fixed assets 4.4 3.3 8.2
Increase in stocks - - (0.2)
Increase/(decrease) in
debtors 1.6 2.0 (1.5)
(Decrease)/increase in
creditors (6.0) (0.1) 6.5
________________________ __________ ___________ __________
Net cash inflow from
operating activities 5.5 10.1 23.0
________________________ __________ ___________ __________
8. Analysis of movement in net debt
At Cash flow At
01.01.2000 30.06.2000
£m £m £m
_______________________ __________ _________ ___________
Cash at bank and in
hand 16.5 (8.9) 7.6
Overdrafts - (4.5) (4.5)
_______________________ __________ _________ ___________
Funds/(debt) due within
one year 16.5 (13.4) 3.1
Debt due after one year (38.3) 4.3 (34.0)
_______________________ __________ _________ ___________
Net debt (21.8) (9.1) (30.9)
_______________________ __________ _________ ___________
9. Borrowing facilities
Prior to the reconstruction of First Leisure Corporation
PLC on 30 January 2000 the subsidiaries of Esporta plc
operated using the credit facilities of First Leisure
Corporation PLC. Since this date, the Group has had
unsecured overdraft facilities of £10m and unsecured
revolving credit facilities of £100m. Interest is payable
on amounts drawn down under these facilities at rates which
vary with LIBOR. The unsecured revolving credit facility
is repayable in November 2003.
As at 30 June 2000 £34.0m of the revolving credit facility
was drawn down.
10. Basis of preparation
Esporta plc was formed as a result of the reconstruction of
First Leisure Corporation PLC. The comparative half year
figures provided in this announcement are those of First
Leisure's Health and Fitness Division prepared on the same
basis as the full year numbers shown in the 1999 pro forma
financial statements.
The interim figures to 30 June 2000 and 30 June 1999 are
unaudited. The results for both periods have been formally
reviewed and reported upon by our auditors. The financial
information for the year ended 31 December 1999 has been
extracted from the unaudited pro forma financial statements
for that year.
11. Interim report and financial statements
Copies of the 2000 interim report, which will be posted to
shareholders in the week commencing 21 August 2000, may be
obtained from the registered office at Trinity Court, Molly
Millars Lane, Wokingham, Berkshire, RG41 2PY. A
presentation of the results will be made to analysts on 11
August 2000. Copies of the slides from the presentation are
available from the Company's registered office.
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