Interim Results
Esporta PLC
15 August 2001
15 August 2001
ESPORTA plc
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2001
Esporta plc, one of the UK's leading operators of health clubs, announces
its interim results for the six months to 30 June 2001.
FINANCIAL HIGHLIGHTS
* Turnover up 25% to £48.2m (H1 2000: £38.5m)
* EBITDA up by 8% to £10.7m (H1 2000: £9.9m)
* Like for like operating profits up 16% to £10.1m (H1 2000: £8.7m)
* Profit before tax and exceptionals down to £3.1m (H1 2000: £4.5m) -
reflecting impact of accelerated opening programme
* Headline earnings per share 1.47p (H1 2000: 2.12p)
* Interim dividend up 11% to 0.5p per share
OPERATIONAL HIGHLIGHTS
* Membership numbers up 34% to 169,000 (June 2000: 126,000)
* 11 clubs to be opened in 2001
* Contracts exchanged for disposal of Espree Clubs
* Platform established for European expansion
Graham Coles, Chief Executive, commented:
'Esporta continues to make good progress towards its goal of being a leading
international health club operator. Our previously stated expansion plans,
both in the UK and Europe, are proceeding well and our clubs in Spain and
Sweden are establishing a strong platform for future growth.
'The performance of our core established clubs is very encouraging and the
progress that we have made in both our UK and European businesses provides us
with the potential to double our estate over the next three years.'
Enquiries:
Esporta plc Brunswick Group Limited
Graham Coles, Chief Executive Fiona Antcliffe
Michael Ball, Finance Director William Cullum
0207 404 5959 today 0207 404 5959
0118 912 3503 thereafter
CHAIRMAN'S STATEMENT
I am pleased to report an encouraging set of half-year results for Esporta -
the first since our expansion into mainland Europe.
RESULTS
Turnover for the first half was £48.2m (2000: £38.5m), an increase of 25%
against last year.
Turnover from like for like clubs (core clubs opened before the end of 1999)
grew by 6%, and clubs opened in 2000 continued to perform well. Good
initial membership numbers have been achieved by clubs opened this year.
Operating profits in like for like clubs grew by 16%, reflecting the combined
benefits of revenue growth and operational gearing. Returns on capital
employed from core established clubs have improved to 20%, from 17% at the
year-end.
Operating profits in total, before exceptional items, were £4.8m (2000: £5.5m)
reflecting, as anticipated, increased initial trading losses incurred by
clubs opened in 2001 following the acceleration of our opening programme.
Operating profits after exceptional items were £3.5m (2000: £5.5m) following
a provision of £1.3m in respect of a permanent diminution in value of the
two Espree clubs. These non-core clubs serve the corporate market in the
City of London and, with no swimming pool, are very much smaller than other
clubs in our estate. The disposal of these clubs for net proceeds of £2.0m,
which was announced on 9th August, focuses our business strategy further on the
Esporta family brand.
Interest rose by 70% to £1.7m (2000: £1.0m), due to continued investment
resulting in a higher level of debt, to leave pre-tax profits at £3.1m before
exceptional items (2000: £4.5m), and at £1.8m after exceptional items (2000:
£4.5m). Headline earnings per share (before exceptional items) were 1.47p
(2000: 2.12p), and earnings per share were 0.72p (2000: 2.12p).
The Board has declared a dividend of 0.5p per share (2000 second interim
dividend: 0.45p) in respect of the first six months, to be paid on 11 October
2001 to shareholders on the register on 7 September 2001. This increase of
11% reflects the Board's confidence in the strength of our underlying trading
performance.
The Group has recently increased the level of its committed bank facilities to
£175m (December 2000: £100m). With net assets of £130m, net debt of £64m and
gearing of 49%, the balance sheet can support our planned organic development
programme.
MEMBERS
Total membership of the clubs increased by 34% to 169,000 (June 2000:
126,000), with the number of adults reaching 128,000 (June 2000: 94,000).
Esporta's primary target members are in their family and post-family life
stages, tend to have higher discretionary income, and value their leisure
time. Consequently, they expect their health and fitness club to provide
excellent service and an array of social activities, as well as the very best
facilities and equipment. We believe that member satisfaction with the
Esporta offering is best measured by the level of retention, and by
expenditure on ancillary services. Retention has improved, despite higher
levels of local competition, by two percentage points during the first six
months to 63%, and the proportion of our revenue generated through ancillary
services remains among the highest in the industry.
UK DEVELOPMENTS
Five new clubs were opened in the UK in the first half and we expect to open
a further three clubs by the end of the year representing an additional
280,000 square feet of capacity for the year as a whole.
We remain committed to a continuing UK development programme. The UK market
remains strong, with good demand for new clubs, particularly in the market
segments that Esporta serves.
MAINLAND EUROPE
The rebranding of the Las Rozas club in Madrid, which we acquired in the
second half of last year, is complete. The reaction to Esporta service
levels has been positive, and membership renewal (at higher membership fees)
is encouraging.
Our first club in Sweden opened in July 2001 on the outskirts of Stockholm
and, following modest opening numbers, good membership sales are now being
achieved. We are opening two clubs in Barcelona in the second half of 2001
and pre-opening sales activity has been encouraging. At these two clubs,
initial membership fees will be at a lower level than in the UK, although
still ahead of the local market. We expect to increase prices once the
Esporta offering is established. We have a further four clubs unconditionally
contracted to open in 2002 in Spain. These will be followed by openings in
Lille, France and Lisbon, Portugal. We are also actively looking at
opportunities in the affluent and underdeveloped German market.
BOARD CHANGES
As previously announced, Mark Beadle left the company in July, and has been
succeeded as Finance Director by Michael Ball, the former Group Finance
Director of Filofax Group plc. We are pleased to welcome Michael to the
Board.
CURRENT TRADING
The trends seen in the first half have continued into July with revenues
generated by like for like clubs opened in 1999 and prior years up by 6% on
last year. Total membership has grown in July by 6,000 to 175,000 (July
2000: 128,000).
OUTLOOK
Demand in the UK remains firm, with new clubs performing well and returns in
our core established clubs growing strongly.
Mainland Europe offers a significant opportunity for us to rapidly develop
the Esporta brand in an immature market place. We have both the managerial
and financial capacity to take advantage of this.
We plan to open twelve to fourteen clubs per annum, with the focus of
development moving from the UK towards mainland Europe over the next two to
three years.
Esporta aims to be a top three operator in terms of revenue in every
territory in which it competes. We have achieved that position in our
domestic market, and are now looking forward to securing a similar position
in the territories in which we operate in mainland Europe.
J.K. Grieves - Chairman
15 August 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
6 6 Year
months months to
Before Exceptional to 30 to 30 31
exceptional item June June December
items (note 2) 2001 2000 2000
Note £m £m £m £m £m
______________ ___ __________ ___________ ______ _______ _________
Turnover 48.2 - 48.2 38.5 79.3
Cost of sales (39.6) (1.3) (40.9) (30.0) (60.1)
______________ ___ ___________ ___________ _______ _______ ________
Gross profit 8.6 (1.3) 7.3 8.5 19.2
Administrative
expenses (3.8) - (3.8) (3.0) (6.2)
______________ ___ ___________ ___________ _______ _______ ________
Operating
profit 4.8 (1.3) 3.5 5.5 13.0
______________ ___ ___________ ___________ _______ _______ ________
EBITDA 10.7 - 10.7 9.9 22.3
Depreciation (5.9) (1.3) (7.2) (4.4) (9.3)
______________ ___ ___________ ____________ _______ _______ _______
Operating
profit 4.8 (1.3) 3.5 5.5 13.0
______________ ___ ___________ ____________ _______ _______ _______
Net interest
payable and
similar
charges (1.7) - (1.7) (1.0) (2.0)
______________ ___ ___________ ____________ _______ ________ ________
Profit on
ordinary
activities
before
taxation 3.1 (1.3) 1.8 4.5 11.0
Tax on profit
on ordinary
activities 3 (0.6) - (0.6) (1.0) (2.2)
______________ ___ ___________ ____________ _______ ________ _________
Profit for the
financial
period 2.5 (1.3) 1.2 3.5 8.8
Dividends 4 (0.8) (1.9) (3.4)
______________ ___ ___________ ____________ _______ ________ ___________
Retained
profit
for the
financial
period 0.4 1.6 5.4
______________ ___ ___________ ____________ _______ ________ ___________
Basic and
diluted
earnings
per ordinary
share
(FRS 14) 5 0.72p 2.12p 5.27p
Basic and
diluted
headline
earnings per
ordinary share
(IIMR) 5 1.47p 2.12p 5.27p
______________ ___ ___________ ____________ _______ ________ ___________
Note: EBITDA - Earnings before interest, tax, depreciation and amortisation.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
Note £m £m £m
____________________________ ___ __________ _____________ ____________
Net cash inflow from
operating activities 6 3.4 5.5 23.5
____________________________ ___ __________ _____________ ____________
Return on investments and
servicing of finance
Interest received 0.1 0.5 0.7
Interest paid (2.3) (2.0) (3.4)
____________________________ ___ __________ _____________ ____________
(2.2) (1.5) (2.7)
____________________________ ___ __________ _____________ ____________
Taxation (0.1) (0.2) (0.9)
Capital expenditure
Purchase of tangible fixed
assets (19.5) (12.4) (30.9)
Sale of tangible fixed - 0.7 0.7
assets
____________________________ ___ __________ _____________ ____________
(19.5) (11.7) (30.2)
____________________________ ___ __________ _____________ ____________
Acquisitions - - (6.9)
____________________________ ___ __________ _____________ ____________
Equity dividends paid (1.5) (1.2) (1.9)
____________________________ ___ __________ _____________ ____________
Net cash outflow before
financing (19.9) (9.1) (19.1)
Financing
New loans 18.0 - 6.7
Repayment of loans - (4.3) -
____________________________ ___ __________ _____________ ____________
18.0 (4.3) 6.7
____________________________ ___ __________ _____________ ____________
Decrease in cash in the
period 7 (1.9) (13.4) (12.4)
____________________________ ___ __________ _____________ ____________
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
6 months to 6 months to Year to
30 June 30 June 31 December
2001 2000 2000
Note £m £m £m
___________________________ ___ ____________ _____________ ____________
Decrease in cash in the
period (1.9) (13.4) (12.4)
Cash (inflow)/outflow from
increase in debt (18.0) 4.3 (6.7)
___________________________ ___ ____________ _____________ ____________
Movement in net debt
resulting from cash flows (19.9) (9.1) (19.1)
Finance leases acquired
with subsidiary undertakings - - (2.3)
New finance leases (1.1) - -
___________________________ ___ ____________ _____________ ____________
Movement in net debt in the
period (21.0) (9.1) (21.4)
Net debt at beginning of
period (43.2) (21.8) (21.8)
___________________________ ___ ____________ _____________ ____________
Net debt at end of period 7 (64.2) (30.9) (43.2)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
30 June 30 June 31 December
2001 2000 2000
£m £m £m
___________________________ ___ ___________ _____________ ____________
Fixed assets
Tangible assets 212.4 173.5 198.9
___________________________ ___ ___________ _____________ ____________
212.4 173.5 198.9
Current assets
Stocks 0.8 0.6 0.7
Debtors 9.1 5.4 7.8
Cash at bank and in hand 2.2 7.6 4.1
___________________________ ___ ___________ _____________ ____________
12.1 13.6 12.6
Creditors: amounts falling
due within one year (30.3) (26.1) (33.5)
___________________________ ___ ___________ _____________ ____________
Net current liabilities (18.2) (12.5) (20.9)
Debtors: amounts falling
due
after one year 1.6 0.9 0.9
___________________________ ___ ___________ _____________ ____________
Total assets less current
liabilities 195.8 161.9 178.9
Creditors: amounts falling
due after more than one (66.0) (36.3) (49.5)
year
___________________________ ___ ___________ _____________ ____________
Net assets 129.8 125.6 129.4
___________________________ ___ ___________ _____________ ____________
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 18.3 14.1 17.9
___________________________ ___ ___________ _____________ ____________
Equity Shareholders' funds 129.8 125.6 129.4
___________________________ ___ ___________ _____________ ____________
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
£m £m £m
_________________________________ __________ ______________ _____________
Retained profit for the financial
period 0.4 1.6 5.4
_________________________________ __________ ______________ _____________
Net movement in Shareholders'
funds 0.4 1.6 5.4
Opening Shareholders' funds 129.4 124.0 124.0
_________________________________ __________ ______________ _____________
Closing Shareholders' funds 129.8 125.6 129.4
_________________________________ __________ ______________ _____________
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 financial statements for the year
ended 31 December 2000.
2 Exceptional item
Exceptional cost of sales of £1.3m represents a charge for impairment of
two of the Group's properties in accordance with FRS 11 Impairment of
Fixed Assets and Goodwill. Subsequent to the period end, contracts have
been exchanged for the disposal of Espree Leisure Limited, a 100% owned
subsidiary of Esporta plc, which held these properties.
3 Tax on profit on ordinary activities
The taxation charge for the six months to 30 June 2001 is based on an
estimate of the Group's effective rate of taxation for the current year
(excluding exceptional items) of 21% (2000: 22%). The effective rate of
taxation for the year to 31 December 2000 was 20%.
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.
The exceptional fixed asset impairment charge is not allowable for
corporation tax.
4 Dividend
An interim dividend of 0.5p per share (2000: first interim 0.7p per share
in respect of 1999 profits, second interim 0.45p per share in respect
of 2000 profits) will be paid on 11 October 2001 to shareholders on the
register at close of business on 7 September 2001.
5 Earnings per ordinary share
The calculation of basic and fully diluted earnings per share is based on
profit after tax divided by the weighted average number of shares in
issue of 166.2m.
Headline earnings per ordinary share, as based on the recommendations of
the Institute of Investment Management and Research (IIMR), is stated
below.
Potentially dilutive shares under option of 0.1m have no effect on the
earnings per share as reported.
6 months to 6 months to Year to
30 June 2001 30 June 2000 31 December 2000
Profit EPS Profit EPS Profit EPS
£m Pence £m pence £m Pence
__________________ ________ ________ _______ ______ ________ ______
Basic and fully
diluted earnings
per ordinary share
(FRS 14) 1.2 0.72 3.5 2.12 8.8 5.27
Add back: asset
impairments 1.3 0.75 - - - -
__________________ ________ ________ _______ ______ ________ ______
Basic and fully
diluted headline
earnings per
ordinary share
(IIMR) 2.5 1.47 3.5 2.12 8.8 5.27
__________________ ________ ________ _______ ______ ________ ______
6 Reconciliation of operating profit to net cash inflow from operating
activities
6 months to 6 months to Year to
30 June 2001 30 June 2000 31 December 2000
£m £m £m
__________________ ________________ ______________ ________________
Operating profit 3.5 5.5 13.0
Depreciation 5.9 4.4 9.3
Exceptional
impairment to
fixed
assets 1.3 - -
Increase in stocks (0.1) - (0.1)
(Increase)/decrease
in debtors (1.8) 1.6 (0.5)
(Decrease)/increase
in creditors (5.4) (6.0) 1.8
__________________ ________________ ______________ ________________
Net cash inflow
from operating
activities 3.4 5.5 23.5
__________________ ________________ ______________ ________________
7 Analysis of movement in net debt
At 1 Cash Non-cash At 30
January flow changes June 2001
2001
£m £m £m £m
____________________ ___________ __________ __________ ____________
Cash at bank and in
hand 4.1 (1.9) - 2.2
____________________ ___________ __________ __________ ____________
Funds/(debt) due
within one year 4.1 (1.9) - 2.2
Debt due after one
year (45.0) (18.0) - (63.0)
Finance leases (2.3) - (1.1) (3.4)
____________________ ___________ __________ __________ ____________
Net debt (43.2) (19.9) (1.1) (64.2)
____________________ ___________ __________ __________ ____________
8 Borrowing facilities
The Group has unsecured overdraft facilities of £10m and unsecured
revolving credit facilities of £175m. Interest is payable on amounts
drawn down under these facilities at rates which vary with LIBOR. The
unsecured revolving credit facilities are repayable in June 2004.
As at 30 June 2001 £63.0m of the revolving credit facility was drawn
down.
9 Basis of preparation
The interim figures to 30 June 2001 and 30 June 2000 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 2000 has been
extracted from the audited financial statements for that year.
10 Interim report and financial statements
Copies of the 2001 interim report, which will be posted to shareholders
in the week commencing 3 September 2001, 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 15 August 2001. Copies of the slides from the presentation
are available from the Company's registered office.
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