Final Results

RNS Number : 9005D

Brighton Pier Group PLC (The)

02 November 2020

 

The Brighton Pier Group PLC

(the "Group")

Final results for the 52 weeks to 28 June 2020

2 November 2020

The Brighton Pier Group PLC (the Group) owns and trades Brighton Palace Pier, as well as eight indoor mini golf sites and twelve premium bars nationwide including.

These trading results for the 52 weeks ended 28 June 2020 (2019: 52 weeks ended 30 June 2019), a period which, since Spring 2020, has been defined by the COVID-19 pandemic.

On 20 March 2020, the UK Government instructed all hospitality and leisure venues to close. This resulted in the complete closure of the Group's bars and golf venues, as well as Brighton Palace Pier itself. All venues remained closed as at 28 June 2020. The Pier, along with those Golf sites situated in England and 2 of the Group's sites in the Bars division reopened on 4 July 2020, after the period end.

The prolonged closures have resulted in impairments to goodwill, property, plant and equipment and right-of-use assets totalling £8.1m. Of this, £7.2m relates to the Bars division, much of which remains unable to trade.

Financial results		52 weeks ended 28 June 2020	52 weeks ended 30 June 2019
		£m (unless otherwise stated)	£m (unless otherwise stated)
Revenue		22.6	32.0
Group EBITDA before highlighted items		2.5	5.3
Group EBITDA after highlighted items		2.5	4.8
(Loss)/profit before taxation and highlighted items		(2.1)	3.2
(Loss)/profit before taxation after highlighted items		(10.2)	2.7
Adjusted (loss)/earnings per share - basic		(5.3)p	7.3p
Adjusted (loss)/earnings per share - diluted		(5.3)p	7.3p
(Loss)/profit after tax and highlighted items		(9.5)	2.2
(Loss)/earnings per share - basic		(25.5)	6.1p
(Loss)/earnings per share - diluted		(25.5)	6.1p

  Note that the comparative period figures do not include the impact of the adoption of IFRS 16.

Commenting on the results, Anne Ackord, Chief Executive Officer, said:

"The COVID-19 pandemic has presented an unprecedented challenge to our business. The closures during Spring 2020 came during what would normally be a key trading period, spanning both the Easter break in April and two May Bank Holiday weekends. Whilst the lost trade is disappointing, I'm proud of the way in which our team has responded to ensure the Group remains in a strong financial position in such uncertain times. Thanks to their efforts, the Group is well placed to resume normal trading at the earliest opportunity.''

All Group announcements and news can be found on www.brightonpiergroup.com.

Enquiries:
The Brighton Pier Group	Tel: [phone]
Luke Johnson, Chairman	Tel: [phone]
Anne Ackord, Chief Executive Officer	Tel: [phone]
John Smith, Chief Financial Officer	Tel: [phone]
Panmure Gordon (UK) Limited (Nominated Adviser and Joint Broker)	Tel: [phone]
Corporate Finance
Atholl Tweedie
Corporate Broking
Charles Leigh-Pemberton
Arden Partners plc (Joint Broker)	Tel: [phone]
Corporate Finance
John Llewellyn-Lloyd / Benjamin Cryer
Investor Relations
Sarah-Jane Woodcock / Charlotte Ridler

Chairman's statement

This financial year has been marked by a first half where we saw improved trading results across almost all metrics and a second half blighted by the worldwide pandemic. No country or company has been spared the challenges which COVID-19 brings to the well-being of all its citizens or employees. From a corporate perspective the virus has presented massive financial and operational challenges to the tourist, travel, leisure and hospitality sectors in particular.

The first half of the year saw revenues up 4.8% at £17.3 million (2019: £16.5 million), earnings before interest, tax, depreciation and amortisation ("EBITDA") after highlighted items up 55.1% at £4.1 million (2019: £2.6 million), EBITDA after highlighted items pre IFRS 16 up 9.6% at £2.9 million (2019: £2.6 million) and operating profit after highlighted items up 42.2% at £2.4 million (2019: £1.7 million). See Note 6 to the financial statements for a reconciliation of profit before tax to EBITDA before and after highlighted items and the impact of IFRS 16.

This strong performance benefited from the successful new golf site openings at Rushden Lakes in March 2019 and Plymouth Drake's Circus in October 2019, as well as the refurbished Putney 'Le Fez' in the Bars division which opened in November 2018. The pier continued to benefit from the redevelopment of the Palm Court Restaurant and Horatio's Bar, boosting conference and events bookings as well as the launch of the new 'Sunset Bar'. These investments have resulted in trading ahead of our expectations during the first half of the year.

We were required by Government to shut all our premises on 20 March when the national lockdown was announced. The devasting impact of the lockdown required management to move quickly, focussing on safely securing and closing down our venues, taking advantage of all Government support packages including the staff furlough scheme, significantly mitigating costs, preserving cash and .negotiating extended facilities with our bank until trading could resume. I am grateful to all our staff at every level of the business who agreed to take pay cuts during the closures. We are also grateful to our many suppliers, landlords and our bank, for agreeing to standstill arrangements, reductions in rent and extensions to credit facilities.

The closures have significantly impacted our full-year results with revenue down 29.4% at £22.6 million (2019: £32.0 million), EBITDA after highlighted items at £2.5 million (2019: £4.8 million), EBITDA after highlighted items pre-IFRS 16 at £0.2 million (2019: £4.8 million) and operating loss before highlighted items at £(2.1) million (2019: operating profit of £3.2 million).

I am pleased to be able to report that Brighton Palace Pier, along with six of our eight golf sites and two of our twelve bars, reopened on 4 July, followed by the remaining two golf sites and soft play on the pier, which reopened on 24 August. Extensive measures have been put in place at all our locations to ensure that social distancing complies with the Government's COVID-19 guidelines. Considerable uncertainty remains surrounding the issue of how and when the Group will be able to reopen the ten bar sites that remain closed. Most of the late-night venues, including those that dominate the Group's Bars division, have not been permitted to reopen, other than two exceptions with food-led operations: 'Lowlander' (in central London) and the outside terrace at 'Coalition' (in Brighton).

 This uncertainty has led to significant write-downs of £7.2 million in the carrying value of the Bars division and £0.9 million in the carrying value of the Golf division

Continuing lockdowns and trade restrictions mean our results for the current financial year ending 27 June 2021 will be materially impacted.

Group trading for the period from 4 July to the end of September has been better than the Board expected. Like-for-like sales (excluding closed sites) for the Group as a whole were at 81% compared to the same 13 weeks last year. The pier has traded at 83%, the Golf division at 87% and the Bars at 65% compared to the same 13 weeks last year. This trading was ahead of the Group's expectations at the time of the reopening.

It is profoundly disappointing to me that the government continues with its failing strategy of lockdowns. The collateral damage from these restrictions and the fear being promoted by the authorities are having a catastrophic impact on our way of life. The loss of jobs, toll on mental health, harm to education, the national finances and treatment of other illnesses will cause vastly more hardship than the virus itself.

I believe that the government and their scientific advisors at SAGE need to change course and focus on protection of the vulnerable, while allowing the majority of the population - who are at low risk from the virus - to resume their normal lives and work, so the country can fund the NHS. Otherwise we are doomed to a never ending cycle of destructive and pointless lockdowns, mass unemployment, suicides, bankruptcies, evictions and economic, cultural and social ruin.

Directorate

There have been no changes in the Board during this financial period.

Dividend

The Board does not propose to pay any dividend in respect of the 2019 financial year.

Luke Johnson

Chairman  2 November 2020

Our business model

The Brighton Pier Group PLC (the 'Group') owns and trades Brighton Palace Pier, as well as twelve premium bars nationwide and eight indoor mini golf sites.

The Group operates as three separate divisions under the leadership of Anne Ackord, the Group's Chief Executive Officer.

Brighton Palace Pier offers a wide range of attractions including two arcades (with over 300 machines) and eighteen funfair rides, together with a variety of on-site hospitality and catering facilities. The attractions, product offering and layout of the pier are focused on creating a family-friendly atmosphere that aims to draw a wide demographic of visitors. The pier is free to enter, with revenue generated from the pay-as-you-go purchase of products from the fairground rides, arcades, hospitality facilities and retail catering kiosks. According to Visit Britain, it is the fifth most popular free attraction in the UK, with 4.9 million visitors in 2019, making it the UK's most visited free attraction outside of London.

The bars trade under a variety of concepts including 'Embargo Republica', 'Lola Lo', 'Po Na Na', 'Le Fez', 'Lowlander', 'Smash' and 'Coalition'. The Group's Bars division predominantly targets a customer base of sophisticated students midweek and stylish over-21s and professionals at the weekend. This division focuses on delivering added value to its customers through premium product ranges, high quality music and entertainment, as well as a commitment to exceptional service standards. The Bars estate is nationwide, incorporating key university cities and towns that provide a vibrant night-time economy and the demographics to support premium bars.

The Golf division (Paradise Island Adventure Golf) operates eight indoor mini-golf sites at high footfall retail and leisure centres. The business capitalises on the increasing convergence between retail and leisure, offering an accessible and traditional activity for the whole family. The first unit was opened in Glasgow, after which followed Manchester, Sheffield, Livingston, Cheshire Oaks, Derby, Rushden Lakes (opened in March 2019) and Plymouth Drake's Circus (opened in October 2019). Each site offers two unique 18-hole mini-golf courses.

Chief Executive Officer's report

This business review covers the trading results for the 52 weeks ended 28 June 2020 (2019: 52 weeks ended 30 June 2019), a period which, since Spring 2020, has been defined by the COVID-19 pandemic.

On 20 March 2020, the UK Government instructed all hospitality and leisure venues to close. This resulted in the complete closure of the Group's bars and golf venues, as well as Brighton Palace Pier itself.

These closures materially impacted the Group's results during the second half of the 52-week period ending 28 June 2020. As a result, this commentary consists of two distinct sections:

· the first section provides a detailed commentary of the business performance for the full 52-week period to 28 June 2020, i.e. including the impact of COVID-19. This section provides detail about the financial impact of the mandatory closure during the last three months of this accounting period and the steps that the Group has taken to significantly reduce costs, preserve cash, protect staff and prepare for reopening, and

· the second section provides a detailed commentary of the business performance for the first half year of trading (26 weeks to the 29 December 2019) during which time the Group was able to trade normally.

Adoption of IFRS 16

On 1 July 2019, the Group adopted the new accounting standard, IFRS 16 Leases.

The new standard replaces IAS 17 Leases and fundamentally alters the classification and measurement of operating leases for lessees, removing the distinction between operating and finance leases.

The Group adopted IFRS 16 on a modified retrospective basis, meaning comparative period information has not been restated, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are therefore recognised in the opening consolidated balance sheet on 1 July 2019.

In order to give a better understanding of the changes resulting from this new standard, Note 7 gives a detailed reconciliation of the changes to the opening consolidated balance sheet.

Full-year results for the 52 weeks to 28 June 2020 (post the outbreak of COVID-19)

On 20 March 2020, the Government ordered all pubs, restaurants, gyms and other social venues across the country to close their doors. Prior to the closure, news of the progress of the virus, had alarmed many customers impacting levels of trade from February 2020 onwards.

With all divisions closed, the senior management team responded immediately to these unprecedented circumstances with a four-point strategy, to:

· safely secure and close down all our venues during the lockdown;

· take advantage of all available Government support packages including the staff furlough scheme;

· significantly mitigate costs and preserve cash until the resumption of trading, and

· negotiate extended facilities with our bank.

All full and part-time staff working in the businesses (and in respect of whom a payroll submission had been made to HMRC on or before 19 March 2020) were retained. By 1 April 2020, of the 500 staff employed across the Group, 485 were furloughed using the Government's 'Coronavirus Job Retention Scheme'; and 15 remained active. Those who remained active included essential maintenance and security teams on the pier, together with senior management across the Group's three divisions.

In addition, all management and staff agreed to take pay cuts for the duration of the closures. These measures significantly reduced the net cash cost of the Group's payroll during the closure period, whilst enabling the Group to protect its workforce.

Other mitigations included:

· utilising the Government's 12-month business rates holiday scheme across the Group's venues;

· deferral of the March 2020 quarterly VAT payment to March 2021 using the Government's VAT deferral scheme;

· support from landlords to reduce the cash impact of rent costs over the next two to three years;

· support from suppliers with whom standstill arrangements were agreed, reducing controllable costs during the closure period to minimal amounts;

· reduced capex spending to only essential capital repairs, and

· support from creditors, who extended credit terms for amounts outstanding at the date the Group's venues closed.

The Group has also lodged claims with its insurers for business interruption losses arising from mandatory closure of the Group's venues. The Financial Conduct Authority (FCA), who regulate the insurance industry, recently took a test case by selecting a range of standard policies from across the insurance industry and testing them in the High Court. The judgment has concluded that generally, the Marsh Resilience policy, which was maintained by the Group for the Bars and Golf divisions at the time that closures commenced, is capable of responding to COVID-19 business interruption claims. The insurers who underwrote the Marsh Resilience policy are now considering whether to appeal this judgment. As a result currently the amount of any claim remains uncertain.

The Group obtained two new Coronavirus Business Interruption Loans (CBILS) of £5 million in aggregate, from its principal bank, Barclays. All the interest for the first year and set-up fees on both loans are met by the Government. These facilities are made up of:

· CBILS 1 - £1.8 million term loan, no repayments in the first year, quarterly repayments thereafter of £450,000 with the facility ending in June 2022;

· CBILS 2 - £3.2 million term loan, no repayments in the first year, quarterly repayments thereafter of £457,000 with the facility ending in March 2023.

The Group has also revised its other facilities as follows:

· existing term loan's bi-annual repayments of £742,500, due in July and October 2020 have been cancelled and subsequent bi-annual payments thereafter reduced to £242,500, to the expiry of the loan in December 2022;

· existing Revolving Credit Facility (RCF) of £1,750,000 extended to July 2022, thereafter, falling to £1,000,000 to December 2022;

· current covenant testing suspended to December 2021, and

· introduction of a minimum liquidity test of £1,750,000 - this test looks at cash-in-hand, plus any undrawn facility available on the RCF.

The impact of the closures has been significant, with the Group reporting a loss before tax and highlighted items for the 52-week period of £(2.1) million (2019: profit of £3.2 million).

Total Group revenue   for the 52-week period was £22.6 million (2019: £32.0 million), down £9.4 million. This equated to 25% down on the prior period reflecting the loss of three months' trading due to the mandatory closure of the entire business, including Easter and the early summer, which are usually such important trading periods for the Pier.

Revenue by division for the 52 weeks was;

· Pier division revenue   £9.5 million  (2019: £14.7 million)

· Bars division revenue  £8.9 million  (2019: £12.8 million)

· Golf division revenue  £4.3 million   (2019: £4.5 million)

Highlighted cost s were £8.1 million (2019: £0.6 million). These costs mostly result from non-cash impairments of goodwill, property, plant and equipment and right-of-use assets relating to eight sites in the Bars division and one site in the Golf division. This is analysed in more detail in Note 5. It should be noted that £7.2 million of this impairment relates to the Bars division, reflecting the considerable uncertainty over the future of the late night bars business, given that at the period end most of the Bars division remained closed with no prospective date for reopening issued by the UK Government.

Despite the set-back from the closures, the Group has continued to be cash generative, with earnings before interest, tax, depreciation and amortisation ("EBITDA") after highlighted items at £2.5 million (2019: £4.8 million) (see Note 2 for the split by division).

Gross margin for the 52-week period was up 88 basis points at 85.3% versus 84.4% in the prior period.

Operating expenses excluding highlighted items fell by £3.0 million, which reflects savings made during the three month mandatory closure period despite the addition of two new golf sites in the 52-week period. The adoption of IFRS 16 resulted in expenses for the period ended 28 June 2020 reducing as result of rent payments being split between right-of-use asset depreciation (included in operating expenses) and finance costs (excluded from operating expenses).

· Operating expenses (excluding highlighted items)  £20.3 million  (2019: £23.3 million)

Finance costs of £1.1 million were incurred in the 52-week period, made up of:

· Interest on borrowings  £0.4 million  (2019: £0.5 million)

· Interest on leases  £0.7 million   (2019: £nil)

The interest on leases relates predominantly to property leases in the Bars and Golf divisions. This charge arises from the first-time adoption in this period of IFRS 16 (see Note 7 for further details).

Operating profit before highlighted items was down £4.7 million versus the prior period and this reflects the impact of the mandatory closures for a quarter of the 52-week period.

· Operating (loss)/profit excluding highlighted items  £(1.0) million  (2019: £3.7 million)

Loss before tax and   after   highlighted items was £10.2 million (2019: profit of £2.7 million). This was primarily driven by the £8.1 million of impairments booked in relation to goodwill, property, plant and equipment and right-of-use assets. The remaining losses arose from the mandatory closures during the period.

The tax credit for the current period was £0.7 million (2019: tax charge £0.4 million).

In summary, for the 52-week period ended 28 June 2020 (compared to the equivalent 52-week period ended 30 June 2019):

· Revenue for the period  £22.6 million   (2019: £32.0 million)

· Group EBITDA before highlighted items   £2.5 million  (2019: £5.3 million)

· Group EBITDA after highlighted items   £2.5 million  (2019: £4.8 million)

· (Loss)/profit before tax and highlighted items  £(2.1) million  (2019: £3.2 million)

· (Loss)/profit before tax and after highlighted items  £(10.2) million  (2019: £2.7 million)

· Adjusted (loss)/earnings per share (basic) (see Note 4)  (5.3) pence  (2019: 7.3 pence)

· Adjusted (loss)/earnings per share (diluted) (see Note 4)  (5.3) pence   (2019: 7.3 pence)

· (Loss)/profit after tax and highlighted items  £(9.5) million   (2019: £2.2 million)

· Basic (loss)/earnings per share  (25.5) pence   (2019: 6.1 pence)

· Diluted (loss)/earnings per share  (25.5) pence  (2019: 6.1 pence)

Note that the comparative period figures do not include the impact of the adoption of IFRS 16.

Half-year results - 26 weeks to 29 December 2019 - pre the outbreak of COVID-19

The Group's interim results were published on 17 March 2020. During the 26 weeks to 29 December 2019, Group sales rose by 4.8% at £17.3 million (when compared to the 26-week period ended 30 December 2018). Improved profitability saw profit before tax and highlighted items up 12% at £2.0 million (2018: £1.7 million). Profit before tax and after highlighted items was up 28% at £1.8 million (2018: £1.4 million).

Total Group revenue   for the half year was up £0.8 million at £17.3 million (2018: £16.5 million), benefitting from the impact of two new site openings in Paradise Island Adventure Golf during the period, the continuing growth in function business and the new 'Sunset Cocktail Bar' on the pier, along with above forecasted performance of the newly refurbished 'Putney le Fez'.

Group gross margin for the 26-week period to 29 December 2019 increased by 85 basis points in comparison with the 2018 period, reflecting the high-margin nature of the growing Golf division, together with a continued focus on pricing in order to mitigate pressure from rising input costs across the rest of the Group. The Bars division's gross margin increased by 73 basis points versus the same 26-week period last year.

Highlighted costs totalling £0.1 million (2018: £0.3 million) were incurred during the 26-week period, relating to site pre-opening costs for the redevelopment of 'Po Na Na' in Bath and the opening of the new adventure golf site in Plymouth.

Principal developments during the first half - pre the outbreak of  COVID-19

Reported Group EBITDA for the 26-week period after highlighted items and post IFRS 16, was up 55% at £4.1 million (2018: £2.6 million); on a comparable basis (pre IFRS 16) with the prior 26-week period, Group EBITDA after highlighted items was up 9.6% at £2.9 million (2018: £2.6 million).

· Golf division - Golf EBITDA for the 26 weeks was up £0.78 million versus the prior period at £1.45 million (2018: £0.67 million).

IFRS 16 - £0.5 million of this increase reflects the impact of the accounting treatment of rent under IFRS 16. On a pre-IFRS 16 basis, the Golf division was up £0.3 million on the prior period.

New sites - Rushden Lakes and Plymouth Drake's Circus are both trading ahead of expectations. The division continues to look for new locations. At present no further sites have been acquired.

· Pier division - EBITDA for the 26 weeks in the combined Palm Court Restaurant and Horatio's Bar was up 18%, with the hospitality team continuing to make excellent progress in the conference and events business, demonstrating revenue growth during the period of £82k versus the prior period.

The pier overall benefited from completion of the railway upgrades on the London mainline route to Brighton, as well as good weather during the August bank holiday weekend, both of which contributed to the pier achieving a record week and meeting expectations for the summer.

The rest of the pier was down £0.1 million versus the prior 26-week period. This reflects the impact of exceptional winter weather forcing closure of many rides due to high winds from the end of the summer onwards. However, increased revenue from the arcades offset much of the impact of these closures, resulting in the Pier division EBITDA as a whole being in line with the prior 26-week period at £1.8 million (2018: £1.8 million).

· Bars division - Bars EBITDA for the 26 weeks was up £0.6 million at £1.3 million versus the prior 26-week period (2018: £0.7 million).

IFRS 16 - £0.7 million of this increase reflects the impact of the accounting treatment of rent under IFRS 16. On a pre-IFRS 16 basis, the Bars division was down £0.1 million on the prior period, which reflects the ongoing challenges in this sector of the market.

Results for the half-year show that the Group continued to be cash-generative, with EBITDA before highlighted items of £4.2 million (2018: £2.9 million) and EBITDA after highlighted items of £4.1 million (2018: £2.6 million).

Group operating profit before highlighted items was £2.5 million (2018: £2.0 million) and Group operating profit for the period after highlighted items was £2.4 million (2018: £1.7 million).

Cash flow for the 26 weeks to 29 December 2019 - pre the outbreak of COVID-19

Net cash flow generated from operations and available for investment (after interest and tax payments) at the end of the half year was £3.8 million (2018: £1.0 million).

Financial review

The adoption of IFRS 16 on 1 July 2019 has had a significant impact on the current period financials. The effect of this new accounting standard on the opening balance sheet is described in detail in Note 7. Its impact on Group EBITDA before and after highlighted items is outlined in Note 6. Comparative period financial information has not been restated.

Cash flow and balance sheet for the 52 weeks to 28 June 2020

Cash flow generated from operations (after interest and tax payments) available for investment was £0.6 million (2019: £3.2 million).

Deferred consideration

In July 2019, £0.4 million of deferred consideration was paid to the previous shareholders of Lethington Leisure Limited for the acquisition of Paradise Island Adventure Golf (2019: £0.6 million).

Fixed assets

The Group invested £1.6 million in capital expenditure during the period (2019: £2.5 million). A significant proportion of this related to the new golf site at Plymouth Drake's Circus. The remaining spend relates to maintenance and minor capital projects across all the divisions.

Shareholders will be aware that each year we undertake an annual substructure survey on the pier. We can report that no additional maintenance issues were identified other than the usual budgeted maintenance requirements for the coming financial year.

Bank debt and cash

At the period end the Group had total bank debt of £16.8 million (2019: £14.8 million) made up of:

· an outstanding principal term facility of £11.8 million (2019: £13.3 million), with no repayments due within the next twelve months to July 2021 (2019: £1.5 million). Debt repayments will be resumed in July 2021 at a reduced rate with bi-annual payments of £0.2 million;

· a new CBILS 1 facility of £1.8 million (2019: £nil) with no repayments due within the next twelve months. Debt repayments will be resumed in September 2021 at a quarterly rate of £0.45 million;

· a new CBILS 2 facility of £3.2 million (2019: £nil) with no repayments due within the next twelve months. Debt repayments will be resumed in September 2021 at a quarterly rate of £0.46 million;

· an undrawn RCF facility of £1.75 million (2019:£1.75 million facility with £1.5 million drawn), and

· cash balances of £2.6 million (2019:£2.7 million).

During the 52-week period, the Group made net drawdowns of £2.0 million (2019:net repayments of £2.0 million), made up of:

· £1.5 million of net repayments to the RCF (2019: £0.5 million);

· £1.5 million of repayments to the principle term facility (2019: £1.5 million), and

· new funding of £5 million from the CBILS 1 and 2 facilities.

Key performance indicators ('KPI's)

The loss of revenue for just over three months in the second half of the period has had a major impact on the Group's performance against its KPIs. This would normally be a key trading period, spanning both the Easter break in April and two May Bank Holiday weekends.

The Group's KPIs remain focused on the continued growth of the Group's three divisions to drive revenues, EBITDA and earnings growth. Despite the prolonged closures, the business remained cash generative.

· Revenue was £22.6 million (2019: £32.0 million)

· EBITDA before highlighted items was £2.5 million (2019: £5.3 million)

· EBITDA after highlighted items was £2.5 million (2019: £4.8 million)

· Group operating loss before highlighted items was £(1.0) million (2019: profit of £3.7 million)

· Group operating loss after highlighted items was £(9.2) million (2019: profit of £3.2 million)

The current year EBITDA figures above are inflated by the adoption of IFRS 16, as prior year comparatives have not been restated. Excluding the impact of IFRS 16, EBITDA after highlighted items was £0.2 million.

Trading for the first half of the period shows the Group up on these KPIs.

· EBITDA before highlighted items at the end of the half year was at £4.2 million (2018: £2.9 million) and EBITDA after highlighted items was £4.1 million (2018: £2.6 million).

· Group operating profit before highlighted items at the end of the half year was £2.5 million (2018: £2.0 million) and Group operating profit for the period after highlighted items was £2.4 million (2018: £1.7 million).

The Group has also benefited from EBITDA generated from the new golf site openings at Rushden Lakes in March 2019 and Plymouth Drake's Circus in October 2019, as well as the refurbished Putney 'Le Fez' in the Bars division which opened in November 2018. The pier continues to benefit from the redevelopment of the Palm Court Restaurant and Horatio's Bar boosting conference and events bookings. All of these developments prior to the closures have exceeded our expectations.

Strategy of the combined Group, current trading and outlook for the coming period

Short to medium-term, strategy and outlook

In the short to medium term, our key aim has been to reopen our businesses as soon as we were able and to focus on returning them to the trading levels pre-closure.

The Group has made progress across its divisions as follows:

Pier division

The pier (with the sole exception of the soft play area) reopened for trade on 4 July 2020, albeit at a reduced capacity to allow for social distancing. The pier's large outside spaces make it possible to allow social distancing and provide plenty of space for tables serviced from the restaurant and bars. The enhanced COVID-19 security measures ensure the safety of the team members and customers.

Golf division

The Golf sites in England also reopened for trade on 4 July 2020 (the Scottish sites reopened on 24 August 2020), albeit at a slightly reduced capacity to allow for social distancing. Adventure golf is by its nature a one-way process with small family groups playing together. We have introduced an online booking system (with fixed time slots to avoid queues), a track and trace system, and have released the last hole to give more space for players to arrive and disperse safely.

Bars division

On 4 July 2020, 'Coalition' in Brighton reopened its rebranded 'La Plage' outside beach terrace to the public. At the same time 'Lowlander' in Covent Garden reopened with a significantly reduced capacity to allow for social distancing.

We are continuing to negotiate with our Landlords for rent concessions. For those marginal bars sites or those on short leases of less than 12 months we are negotiating disposal. For all other sites, 75% of our remaining landlords have so far agreed in principle to some form of support during the extended closure period such as rent reductions and/or some form of turnover percentage rent when the sites return to full trading.

Financial impact

Whilst it is difficult to predict the amount of time it will take to get back to pre-COVID-19 levels, the Directors are encouraged by trading for open sites for the first 13 weeks to the end of September 2020.

Like-for-like sales (excluding closed sites) for the Group as a whole were at 81% compared to the same 13 weeks last year. The Pier division has traded at 83%, the Golf division at 87% and the Bars division at 65% compared to the same 13 weeks last year. This trading was ahead of the Group's expectations at the time of the reopening.

Longer term: new acquisitions and developments

The longer-term strategy of the enlarged Group continues to be to capitalise on the skills of the Group to create a growth company operating across a diverse portfolio of leisure and entertainment assets in the UK. The Group will achieve this objective by way of organic revenue growth across the whole estate, together with the active pursuit of future potential strategic acquisitions of leisure and entertainment destinations (many of which have been significantly impacted by the pandemic) that could enhance the Group's portfolio, realising synergies by leveraging scale. It is the Board's longer-term strategy to position the Group as a consolidator within this sector.

Significant events that have taken place since the period end

The Government announced its decision to restrict the terminal hours and the sale of alcohol in all hospitality settings from 10.00p.m. on 25 September 2020. This decision will not have a significant impact for the Pier or the Golf divisions however it has for the time being resulted in the halt of our trial at Embargo and Putney 'Le Fez', as well as forcing earlier closures of Lowlander in Covent Garden. We plan to restart this trial as soon as these restrictions are lifted.

With the Government's original Coronavirus Job Retention Scheme closing at the end of October 2020, and with the majority of the late night bars still closed, the Group was forced to come to the difficult decision that the Bars division could no longer continue to keep large numbers of staff without the prospect of future work and support from the furlough grant. On the 14 August 2020 therefore, the Group started a process to serve notice on all non-essential staff, with most of these redundancies completed by the end of September 2020.

The announcement from the Prime Minister on 31 October indicating a return to a four week lockdown was not unexpected.  Whilst disappointing, with only 'Lowlander' now trading in the Bars division and the Pier in its traditionally quiet period as we head into the winter months, the impact  in all three divisions will be mitigated to a large degree by the extension of the furlough scheme to the end of  November. This limited closure period was part of our considerations at the time we performed our stress testing of the business and does not in any way change the conclusions we reached.

Consolidated statement of comprehensive income

For the 52-week period ended 28 June 2020

			52 weeks ended 28 June 2020	52 weeks ended 30 June 2019
		Notes	£'000	£'000
Revenue			22,621	32,022
Cost of sales			(3,329)	(4,995)
Gross profit			19,292	27,027
Operating expenses - excluding highlighted items			(20,329)	(23,301)
Highlighted items		3	(8,117)	(557)
Total operating expenses			(28,446)	(23,858)
Operating (loss)/profit - before highlighted items			(1,037)	3,726
Highlighted items		3	(8,117)	(557)
Operating (loss)/profit			(9,154)	3,169
Finance income			18	-
Finance cost			(1,071)	(480)
(Loss)/profit before tax and highlighted items			(2,090)	3,246
Highlighted items		3	(8,117)	(557)
(Loss)/profit on ordinary activities before taxation			(10,207)	2,689
Taxation on ordinary activities			714	(446)
(Loss)/profit and total comprehensive income for the period			(9,493)	2,243
(Loss)/earnings per share - basic* (pence)			(25.5)	6.1
(Loss)/earnings per share - diluted (pence)			(25.5)	6.1

* 2020 basic weighted average number of shares in issue is 37.29 million (2019: 36.64 million).

No other comprehensive income was earned during the period (2019: £nil).

Consolidated balance sheet

As at 28 June 2020

		As at 28 June 2020		As at 30 June 2019
		£'000		£'000
Non-current assets
Intangible assets		9,467		12,715
Property, plant and equipment		25,763		27,169
Right-of-use assets		17,283		-
Net investment in finance leases		689		-
Other receivables due in more than one year		367		367
		53,569		40,251
Current assets
Inventories		562		624
Trade and other receivables		1,926		1,564
Cash and cash equivalents		2,649		2,725
		5,137		4,913
TOTAL ASSETS		58,706		45,164
EQUITY
Issued share capital		9,322		9,322
Share premium		15,993		15,993
Merger reserve		(1,111)		(1,111)
Other reserve		452		407
Retained deficit		(9,660)		(167)
Equity attributable to equity shareholders of the Parent		14,996		24,444
TOTAL EQUITY		14,996		24,444
LIABILITIES
Current liabilities
Trade and other payables		3,945		5,022
Other financial liabilities		-		2,003
Lease liabilities		2,250		-
Income tax payable		35		393
Provisions		-		131
		6,230		7,549
Non-current liabilities
Other financial liabilities		16,797		12,787
Lease liabilities		20,683		-
Deferred tax liability		-		384
		37,480		13,171
TOTAL LIABILITIES		43,710		20,720
TOTAL EQUITY AND LIABILITIES		58,706		45,164

Consolidated statement of cash flows

For the period ended 28 June 2020

		52 weeks to		52 weeks to
		28 June 2020		30 June 2019
		£'000		£'000
Operating activities
(Loss)/profit before tax		(10,207)		2,689
Net finance costs		1,053		480
Amortisation of intangible assets		84		62
Impairment of goodwill		3,209		-
Depreciation of property, plant and equipment		1,528		1,493
Impairment of property, plant and equipment		1,408		-
Depreciation of right-of-use assets		1,860		-
Impairment of right-of-use assets		3,463		-
Gain on recognition of sub-leased property		(40)		-
Loss/(profit) on disposal of property, plant and equipment and assets held for sale		10		(96)
Share-based payment expense		45		45
(Decrease)/increase in provisions		(54)		72
Decrease/(increase) in inventories		62		(25)
Increase in trade and other receivables		(819)		(140)
Increase/(decrease) in trade and other payables		58		(119)
Interest paid on borrowings		(398)		(439)
Interest paid on lease liabilities		(673)		-
Interest received		1		-
Income tax paid		(28)		(809)
Net cash flow from operating activities		562		3,213
Investing activities
Purchase of property, plant and equipment and intangible assets		(1,585)		(2,548)
Proceeds from disposal of property, plant and equipment and assets held for sale		-		801
Interest received on finance lease receivables		18		-
Capital element received on finance leases		50		-
Payment of deferred consideration to former Lethington Limited Shareholders		(354)		(591)
Net cash flows used in investing activities		(1,871)		(2,338)
Financing activities
Proceeds from borrowings		6,750		1,300
Repayment of borrowings		(4,785)		(3,235)
Proceeds from issue of shares		-		973
Principal paid on lease liabilities		(732)		-
Net cash flows generated from/(used in) financing activities		1,233		(962)
Net decrease in cash and cash equivalents		(76)		(87)
Cash and cash equivalents at beginning of period		2,725		2,812
Cash and cash equivalents end of period		2,649		2,725

Consolidated statement of changes in equity

For the period ended 30 June 2019

		Issued share capital	Share premium	Merger reserve	Other reserves	Retained earnings/ (deficit)	Total shareholders' equity
		£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2018		8,916	15,426	(1,111)	362	(2,410)	21,183
Profit and total comprehensive income for the period		-	-	-	-	2,243	2,243
Transactions with owners:
Issue of shares		406	567	-	-	-	973
Share issue costs taken directly to equity		-	-	-	-	-	-
Share-based payments charge		-	-	-	45	-	45
At 30 June 2019		9,322	15,993	(1,111)	407	(167)	24,444
Loss and total comprehensive loss for the period		-	-	-	-	(9,493)	(9,493)
Transactions with owners:
Share-based payments charge		-	-	-	45	-	45
At 28 June 2020		9,322	15,993	(1,111)	452	(9,660)	14,996

Notes to the consolidated financial statements

For the period ended 30 June 2019

1.  Accounting policies

The Brighton Pier Group PLC is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on AIM. Its registered address is 36 Drury Lane, London, WC2B 5RR. Both the immediate and ultimate Parent of the Group is The Brighton Pier Group PLC. The Brighton Pier Group PLC owns and operates Brighton Pier, one of the leading tourist attractions in the UK. As at 28 June 2020, the Group also operated 12 premium bars (2019:12) and 8 (2019:7) indoor adventure golf facilities trading in major towns and cities across the UK.

Announcement

This announcement was approved by the Board of Directors on 2 November 2020. The preliminary results for the period ended 28 June 2020 are based on the audited financial statements for the same period. The financial information for the period ended 28 June 2020 and the period ended 30 June 2019 does not constitute the company's statutory accounts for those periods. The auditors' reports on the accounts for 28 June 2020 and 30 June 2019 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Basis of preparation

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to financial statements of the Group for the period ended 28 June 2020 and in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the period ended 28 June 2020. These accounting policies were consistently applied for all the periods presented, with the exception of the adoption of IFRS 16 Leases in the current period, the effects of which are detailed in Note 7.

The financial statements are presented in sterling under the historical cost convention. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

The financial statements are prepared on a 52 or 53-week basis up to the last Sunday in June or the first Sunday in July each year (2020: 52-week period ended 28 June 2020; 2019: 52-week period ended 30 June 2019).  The notes to the consolidated financial statements are on this basis.

Going concern

The closure of the Group's operations in FY2020 and the gradual unlocking of trading in FY2021 has had, and will continue to have, a significant impact on historical and future trading. Despite these closures, the business has generated positive earnings before interest, tax, depreciation and amortisation ("EBITDA") for the 52-week period ended June 2020. All areas of the Pier and the Golf divisions are currently trading (with the children's soft play being the last to open in the week beginning 10 August 2020 and the two Scottish golf sites reopening on the 25 August 2020), albeit subject to the lockdown restrictions in England due to commence on 5 November 2021. The Directors believe that this trading, albeit below normal levels, along with existing cash reserves, will continue to fund the Group's cash requirements through FY2021.

The Directors and management of the business have reviewed the Group's detailed forecast cash flows for the forthcoming twelve months from the date of the approval of the financial statements and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due. These cash flow forecasts and re-forecasts are prepared regularly as part of the business planning process. These have been analysed in the light of the COVID-19 outbreak, subjected to stress testing, scenario modelling and sensitivity analysis, which the Directors consider sufficiently robust.

As part of this assessment, the Directors performed a "stress test" in order to model a scenario to identify the adequacy of the Group's cash resources as a whole to fund all of the various parts of the Group for the next twelve months. This scenario modelled the impact of a second wave of COVID-19 which results in a two month closure of the Group's eight Golf businesses otherwise trading at a reduced basis of 80% of sales until March 2021; furthermore, all of the Bars division sites, continue to be closed until March 2021, and the pier closes for two months due to the national lockdown then enters its traditionally quiet winter period where sales no longer fund its operating costs. This scenario included other critical assumptions specifically in relation to the Group including:

That the Pier Division;

· remained fully open to the end of summer 2020, benefitting from trading from the start of July (traditionally this sales period represents a significant proportion of the division's profits);

· that the pier is closed for most of November and December 2020 due to the national lockdown;

· only the usual essential staff remain after January 2021 until the pier gears up again for Easter and the following summer period;

· returns most staff on the pier to furlough for the two months of the lock down period except for security and essential maintenance, and

· has no further mitigations that are available to further reduce direct operational costs or other fixed overheads once the pier reopens.

That the Bars Division;

· disposes of sites generating marginal EBITDA and/or with leases that are due to expire in the next 12 months;

· receives ongoing support from landlords by agreeing three-year deals with a significant reduction from pre-COVID-19 rent, combined with a turnover rent paid when sales return to prior year levels;

· retains only essential management in the business and that they remain on reduced salary until the businesses reopen, and

· obtains support where necessary for staff, from the corona virus Job Support Scheme.

That the Golf division;

· remained fully open to the end of October 2020;

· thereafter the Golf division is closed for all of November and December 2021 due to the national lockdown;

· reopening from January 2021 albeit at a reduced level of 80% of the prior year revenue through until March 2021;

· returns most staff in the Golf division to furlough for the two months of lock down period, and

· has no further mitigations that are available to further reduce direct operational costs or other fixed overheads once the businesses reopen.

In addition, this assumes that the Group gets no additional Government support other than that already announced, which includes ongoing savings until March 2021 from the Government's rates relief scheme, benefit from the 'Job Retention Bonus' (this bonus is a £1,000 one-off taxable payment for each eligible employee that was furloughed and kept continuously employed until 31 January 2021), Job Support Scheme and benefit from the extended furlough grant during lock down at 80%.

This stress test shows that the Group as a whole has adequate resources to continue to trade, despite these extended closures. Furthermore, until the September 2021 quarter, the Group's bank has waived all existing covenant tests and introduced a new monthly minimum liquidity test that is triggered when the Group's cash resources fall below £1.75 million. Even under the stress test scenario, the Group's forecast shows significant headroom on the liquidity test throughout the forecast period to the end of June 2022.

The Group's existing covenant testing had been agreed to restart from the quarter ending September 2021. These tests, prepared at the time of the refinancing, assumed that all the Group's trading operations will have been open for the prior twelve months.

In light of ongoing events, formal bank credit approval has now also been received from the Group's bank for the waiver of the September 2021 quarterly covenant tests (legal documentation is now in process) which will provide further headroom over the coming 12 months.

However, if closures in the Bars division were to extend beyond the stress test assumptions into July 2021, then given the sensitivity of these covenant tests, it is possible that a breach could occur in December 2021 if the tests were applied with no modifications. Even with extended closure of the Bars to the end of  July 2021 and a three month closure of the rest of the business through until the end of January 2021, the liquidity test would not be breached.

Nevertheless, the Directors believe that given the low levels of leverage, the asset-backed nature of the debt and the level of cash that is forecast to be available at the end of summer 2021, renegotiated covenant levels could be agreed with the Bank to take into account the loss of cash flow during the forced extended closures.

Whilst stress testing the business is important given the unprecedented nature of the events surrounding COVID-19, the Directors expect the Group to continue to meet its day-to-day working capital requirements from the cash flows generated by its trading activities, loan facilities with its bank as well as cash resources available to it throughout the three divisions should it be required. Accordingly, these financial statements have been prepared on the going concern basis.

2.  Segmental information

The following tables' present revenue, profit and loss and certain asset and liability information regarding the Group's business segments for the 52 week period ended 30 June 2019, and the 53 week period ended 1 July 2018.

52-week period ended 28 June 2020	Owned Bars	Brighton Palace Pier	Golf	Total segments	Head office costs	2020 consolidated total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	8,878	9,459	4,284	22,621	-	22,621
Cost of sales	(1,704)	(1,561)	(64)	(3,329)	-	(3,329)
Gross profit	7,174	7,898	4,220	19,292	-	19,292
Gross profit %	81%	84%	99%	85%	-	85%
Administrative expenses (excluding depreciation and amortisation)	(6,077)	(7,671)	(2,287)	(16,035)	(821)	(16,856)
Divisional earnings/(loss)	1,097	227	1,933	3,257	(821)	2,436
Highlighted items					(8,117)	(8,117)
Depreciation and amortisation (excluding depreciation of right-of-use assets)					(1,612)	(1,612)
Depreciation of right-of-use assets					(1,860)	(1,860)
Net finance cost (excluding interest on lease liabilities)					(398)	(398)
Net finance costs arising on lease liabilities					(656)	(656)
Profit/(loss) before tax	1,097	227	1,933	3,257	(13,464)	(10,207)
Income tax					-	-
Profit/(loss) after tax	1,097	227	1,933	3,257	(13,464)	(10,207)
EBITDA (before highlighted items)	1,097	227	1,933	3,257	(759)	2,498
EBITDA (after highlighted items)	1,097	227	1,933	3,257	(796)	2,461

Concession income from the pier is included within pier revenue and amounted to £136,000 for the period ended 28 June 2020 (2019: £201,000).

52-week period ended 30 June 2019		Owned Bars	Brighton Palace Pier	Golf	Total segments	Head office costs	2019 consolidated total
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue		12,845	14,695	4,482	32,022	-	32,022
Cost of sales		(2,525)	(2,423)	(47)	(4,995)	-	(4,995)
Gross profit		10,320	12,272	4,435	27,027	-	27,027
Gross profit %		80%	84%	99%	84%		84%
Administrative expenses (excluding depreciation and amortisation)		(8,959)	(9,204)	(2,855)	(21,018)	(728)	(21,746)
Divisional earnings		1,361	3,068	1,580	6,009	(728)	5,281
Highlighted items						(557)	(557)
Depreciation and amortisation						(1,555)	(1,555)
Finance cost						(480)	(480)
Profit before tax						(3,320)	2,689
Income tax						(446)	(446)
Profit after tax						(3,766)	2,243
EBITDA (before highlighted items)		1,361	3,068	1,580	6,009	(683)	5,326
EBITDA (after highlighted items)		1,361	3,068	1,580	6,009	(1,240)	4,769

All segment assets and liabilities are located within the United Kingdom and all revenues arose in the United Kingdom.

Segment revenues are generated from the sale of goods to external customers on a point in time basis, with the exception of concession income on the Pier as detailed above. There were no inter-segment sales in the years presented. No single customer contributed more than 10% of the Group's revenues.

The accounting policies of the reportable segments have been consistently applied. Overheads have been separated out to reflect how management reviews the discrete financial information and uses it to allocate resources.

3.  Highlighted items

	Period ended 28 June 2020		Period ended 30 June 2019
	£'000		£'000
Acquisition and pre-opening costs
Site pre-opening costs	37		356
	37		356
Impairment, closure and legal costs
Impairment of goodwill	3,209		-
Impairment of property, plant and equipment	1,408		-
Impairment of right-of-use assets	3,463		-
Profit on disposal of Derby freehold	-		(133)
Other closure costs & legal costs	-		334
	8,080		201
Total	8,117		557

The above items have been highlighted to give a better understanding of non-comparable costs included in the consolidated statement of comprehensive income for this period.

Period ended 28 June 2020

Site pre-opening costs of £37,000 incurred during the period ended 28 June 2020 relate to expenses incurred during the development of two new sites at Rushden Lakes and Plymouth.

Impairments to goodwill, property, plant and equipment and right-of-use assets totalling £8,080,000 relate to 8 sites in the Bars division and one site in the Golf division. Further details can be found in Note 5.

Period ended 30 June 2019

Site pre-opening costs of £356,000 incurred during the period ended 30 June 2019 relate to expenses incurred during the redevelopment of 'Le Fez' in Putney and of two new sites at Rushden Lakes and Plymouth.

Other closure and legal costs of £201,000 were incurred during the period ended 30 June 2019. These arose from the closure of Reading Coalition £236,000, a book profit of £133,000 from the disposal of the Derby freehold site and a further £98,000 of costs related to redundancies.

4.  Earnings per share

Basic earnings per share amounts are calculated by dividing net income for the period attributable to ordinary shareholders of The Brighton Pier Group PLC by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Adjusted basic and diluted earnings per share are calculated based on the profit for the period adjusted for highlighted items and their related tax effects.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

Basic (loss)/earnings per share	Period ended	Period ended
	28 June 2020	30 June 2019
(Loss)/profit for the period (£'000)	(9,493)	2,243
Basic weighted number of shares (number)	37,286,284	36,641,819
(Loss)/earnings per share - Basic (pence)	(25.5)	6.1

Basic adjusted (loss)/earnings per share	Period ended	Period ended
	28 June 2020	30 June 2019
(Loss)/profit for the period before highlighted items (£'000)	(1,977)	2,669
Basic adjusted weighted number of shares (number)	37,286,284	36,641,819
Adjusted (loss)/earnings per share - Basic (pence)	(5.3)	7.3

Diluted basic (loss)/earnings per share	Period ended	Period ended
	28 June 2020	30 June 2019
(Loss)/profit for the period (£'000)	(9,493)	2,243
Diluted weighted number of shares (number)	37,286,284	36,779,103
(Loss)/earnings per share - Diluted (pence)	(25.5)	6.1

Adjusted diluted (loss)/earnings per share	Period ended	Period ended
	28 June 2020	30 June 2019
(Loss)/profit for the period before highlighted items (£'000)	(1,977)	2,669
Diluted weighted number of shares (number)	37,286,284	36,779,103
Adjusted (loss)/earnings per share - Diluted (pence)	(5.3)	7.3

Reconciliation of adjusted (loss)/profit for the period

Adjusted profit is calculated as follows:

	Period ended	Period ended
	28 June 2020	30 June 2019
	£'000	£'000
(Loss)/profit for the period	(9,493)	2,243
Highlighted items	8,117	557
Tax on highlighted items	(601)	(131)
Adjusted (loss)/profit for the period	(1,977)	2,669

Diluted basic earnings per share

The impact of dilutive shares on the weighted average number of shares is summarised below:

	2020	2019
	Number	Number
Weighted average number of shares for Basic EPS	37,286,284	36,641,819
Dilutive effect of share options and warrants	-	137,284
Weighted average number of shares for Diluted EPS	37,286,284	36,779,103

In the prior year, share options with exercise prices of 55p, 63.5p, 95p and 111p have not been included in the calculation of weighted average number of shares for diluted earnings per share as these options are anti-dilutive.

5. Impairment review

The Group performed its annual impairment test in June 2020 (2019: June). The Group considers the relationship between the trading performance of each CGU and their book value when reviewing for indicators of impairment. The onset of the COVID-19 pandemic resulted in the compulsory closure of all the Group's trading sites on 20 March 2020. As at 28 June 2020, almost all of the Group's trading estate remaining closed, however the Pier and the Golf sites located in England were due to reopen on 4 July 2020. In addition, the Lowlander and Brighton Coalition sites were due to reopen on 4 July 2020, albeit at a significantly reduced capacity. As at the period end date all remaining sites in the Bars division remained closed with no prospective date for reopening issued by the UK Government. Further information relating to the impact of COVID-19 on the Group can be found in the Strategic Report.

The COVID-19 pandemic has therefore been treated by management as an indicator for impairment, prompting a full review of the recoverable amount of all cash generating units (CGUs) within the Group. Each of the Group's sites represents a separate CGU, which were assessed individually for impairment. The carrying value of each CGU consists of the net book value of goodwill (where applicable), property plant and equipment and right-of-use assets. Goodwill is allocated to the site on which it arose.

Based on management's review of the expected performance of the core estate, impairments totalling £8,080,000 were identified. These impairments, along with their impact on the carrying value of the Group's CGUs is detailed in the table below. There were no impairments required during the prior period.

	Carrying value prior to impairment review		Impairment	Carrying value carried forward
	£'000	£'000		£'000
Goodwill	12,396	(3,209)		9,187
Property, plant and equipment	27,171	(1,408)		25,763
Right-of-use assets	20,746	(3,463)		17,283
Total carrying value of CGUs	60,313	(8,080)		52,233

The impairments mostly relate to the Bars division, with some also occurring in the Golf division, as shown in the table below. There were no impairments required in respect of the Pier division.

	Goodwill	Property, plant and equipment		Right-of-use assets		Total		Recoverable amount (value-in-use)
	£'000	£'000		£'000		£'000		£'000
Bars division
Embargo	860	-		-		860		2,548
Lowlander	736	115		103		954		57
Putney Fez	298	-		-		298		2,950
Bath Po Na Na	268	91		966		1,325		-
Bristol Po Na Na	249	-		-		249		855
Brighton Coalition	130	337		135		602		-
Wimbledon Smash	137	407		922		1,466		-
Reading Lola Lo	-	33		279		312		975
Reading Smash	-	296		767		1,063		-
Cambridge Fez	-	30		25		55		-
Total Bars	2,678	1,309		3,197		7,184		7,385
Golf division
Derby	531	99		266		896		1,711
Total group impairments	3,209	1,408		3,463		8,080

Methodology

The recoverable amount of each CGU has been determined based on a value in use calculation performed as at 28 June 2020 using cash flow projections from financial budgets as at 28 June 2020 approved by senior management covering the period to June 2022. In order to reflect the uncertainty regarding future performance resulting from the COVID-19 pandemic, these cash flow projections modelled two scenarios - a 'base case', which represents management's realistic expectation for the performance of each site, and a 'stress test' scenario which models a reasonably possible situation in which the impact of the pandemic is more severe and long-lasting. Management then applied a percentage likelihood of each scenario occurring and from that derived weighted average forecast cash flows for each CGU.  Cash flows for each CGU beyond June 2022 are extrapolated, using assumed terminal growth and pre-tax discount rates for each operating segment as follows:

Division	Terminal growth rate	Pre-tax discount rate
Bars	2%	13.74%
Golf	2%	12.42%
Pier	2%	12.42%

In the prior period, a terminal growth rate of 1.5% and a pre-tax discount rate of 9.60% was used across all divisions. This was because in the prior period, each CGU shared similar risks and had materially similar geographical characteristics, being UK sites located out of town in shopping centres or similar retail outlets. The COVID-19 pandemic has resulted in the Bars division facing uncertainty over when or if its sites can resume normal trading. This uncertainty is not shared by the Pier and Golf divisions, which fully reopened during summer 2020. Management has therefore applied an additional risk  to the pre-tax discount rate applied to the CGUs within the Bars division.

To assess for impairment, the value in use of the CGU is compared to the carrying value of the assets of that CGU including any attributed goodwill. If the resultant net present value of the discounted cash flows is less than the carrying value of the CGU including goodwill, the difference is written off through the statement of comprehensive income. Impairments to property, plant and equipment and right-of-use assets are allocated on a proportional basis based on the carrying value of each category of asset and the impairment required.

The calculation of value in use for all CGUs is most sensitive to the following assumptions:

• discount rates;

• growth rates used to extrapolate cash flows beyond the forecast period;

• growth in expenses, including rent based on rent reviews.

Discount rates - The discount rate calculation is based on the specific circumstances of each division and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group's investors. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service.

Growth rates - Rates are based on market conditions and economic factors such as the changing habits of students in the towns and cities the Group operates in as well as competition faced from other businesses in these areas. Management has also considered general consumer confidence, including factors like job prospects, inflation and household disposable income. When determining the appropriate growth rates, management has also considered the regulatory environment.

Growth in expenses including rent - the Group's main costs are drinks, labour and rent. Estimates regarding the drink cost are based on past actual price movements as well as expected results from supplier negotiations.  Labour increases have been estimated in relation to the National Minimum Wage. Rent reviews are typically every five years and budgets assume increases of between 2 to 5% annually compounded. The rate reflects the specific market locations for the related venue.

Period of cash flows - the Group considers the period of cash flows over which it expects the future cash generating units to be operational. This can be longer than the current period upon which the sites hold rental agreements and therefore require an element of judgement by the Group. The majority of leasing arrangements are inside the Landlords and Tenants Act 1954, therefore it can be reasonably assumed that an extension will occur. For leases outside the Landlords and Tenants Act 1954 the Group considers the best available information to determine whether a lease extension is likely, and whether the period of cash flows should be reviewed on a period longer than the current lease agreement. For those leases outside of the act, the extension required to the existing lease terms to result in no impairment would be as follows:

Glasgow  - 9 years

Manchester  - 8 years

Livingston    - 6 years

Headroom is dependent upon sensitivities to these and other assumptions. The only element of goodwill remaining in the Bars division is in 'Putney Le Fez'. An increase in the WACC or a decrease in the long-term growth rate would result in further impairment of goodwill at this site.

All sites in the Golf division are sensitive to small to moderate changes in either the WACC or the long-term growth rate. An increase to the WACC or decrease in the long-term growth rate of less than 0.5% would result in goodwill impairments at the Livingston, Cheshire Oaks and Rushden sites.

The site which is allocated the most goodwill in the Golf division, Manchester, is able to support an increase in the WACC discount factor to 18.4% before an impairment is triggered. Similarly, the site is able to support a reduction in the terminal growth rate of 6.1% before an impairment is triggered.

The other sites, excluding Plymouth which does not have goodwill, are able to support increases in the WACC to between 14.6% (Sheffield) and 14.7% (Glasgow), and a reduction in the terminal growth rate of 2.0% (Sheffield and Glasgow) before an impairment is triggered.

Should EBTIDA remain in line with management forecasts to FY22, but then remain flat after FY22 and into perpetuity, then this would result in further impairments of £0.8million in the Bars division and £1.0million in the Golf division.

Should EBTIDA suffer a fall of 5% per year over the forecast two year period to June 2022, before recovering to 2% growth in perpetuity, then this would result in further impairments of £0.5million in the Bars division and £0.7million in the Golf division. Neither of these scenarios would result in impairments being required to the Pier division.

An analysis of goodwill by CGU for those CGUs where the goodwill is significant in the context of the overall goodwill is as follows:

		£'000
Bars
Putney		888
Golf
Glasgow		2,055
Manchester		2,997
Sheffield		1,012
Rushden		1,272
		8,224
Other sites		963
Total goodwill		9,187

6.  Non-GAAP measures

The Group uses certain alternative performance measures such as EBITDA as a means of evaluating the trading performance and cash generation of the underlying business. EBITDA is presented before and after highlighted items. Highlighted items reflect non-comparable costs included in the consolidated statement of comprehensive income for each period. This allows users of the annual report and financial statements to assess the current period trading performance of the Group and compare it to the prior period on a like-for-like basis.

Likewise, the impact of IFRS 16 has been highlighted in order to aid comparability with the prior period, which has not been restated to reflect the new accounting standard. The application of IFRS 16 results in a material change to the presentation of the Group's results. Prior to the adoption of IFRS 16, lease payments were treated as an expense which was included in EBITDA. From 1 July 2019, these costs were reflected through right-of-use asset depreciation and finance costs which result in significant cash outflows and are excluded from EBITDA.

Group profit before tax can be reconciled to Group EBITDA as follows:

	2020				2019
EBITDA Reconciliation	26 week period to 29 December 2019	26 week period to 28 June 2020	52 week period to 28 June 2020	26 week period to 30 December 2018	26 week period to 30 June 2019	52 week period to 30 June 2019
Profit before tax for the year	1,846	(12,053)	(10,207)	1,438	1,251	2,689
Add back depreciation of property, plant and equipment	710	818	1,528	907	586	1,493
Add back depreciation of right-of-use assets	901	959	1,860	-	-	-
Add back amortisation	67	17	84	30	32	62
Add back finance costs	535	536	1,071	236	244	480
Add back share based payment charge	21	24	45	21	24	45
Add back highlighted items	110	8,007	8,117	303	254	557
Group EBITDA before highlighted items	4,190	(1,692)	2,498	2,935	2,391	5,326
Impact of IFRS 16	(1,197)	(1,026)	(2,223)	-	-	-
Pre-IFRS 16 Group EBITDA before highlighted items	2,993	(2,718)	275	2,935	2,391	5,326

Group EBITDA after highlighted items excludes those highlighted items that do not impact EBITDA as follows:

	2020				2019
	26 week period to 29 December 2019		26 week period to 28 June 2020	52 week period to 28 June 2020	26 week period to 30 December 2018	26 week period to 30 June 2019	52 week period to 30 June 2019
	£'000		£'000	£'000	£'000	£'000	£'000
EBITDA before highlighted items		4,190	(1,692)	2,498	2,935	2,391	5,326
Highlighted items		(110)	(8,007)	(8,117)	(303)	(254)	(557)
Add back impairments of:
Goodwill		-	3,209	3,209	-	-	-
Property, plant and equipment		-	1,408	1,408	-	-	-
ROU asset write down		-	3,463	3,463	-	-	-
Group EBITDA after highlighted items		4,080	(1,619)	2,461	2,632	2,137	4,769
Impact of IFRS 16		(1,197)	(1,026)	(2,223)	-	-	-
Pre-IFRS 16 Group EBITDA after highlighted items		2,883	(2,645)	238	2,632	2,137	4,769

Based on the above, EBITDA after highlighted items is split between the Group's operating segments as follows:

	As reported	IFRS 16 adjustments	Pre-IFRS 16
For the 52-weeks ended 28 June 2020
Operating segment	£'000	£'000	£'000
Bars	1,097	(1,293)	(196)
Pier	227	(4)	223
Golf	1,933	(926)	1,007
Head office costs	(796)	-	(796)
EBITDA (after highlighted items)	2,461	(2,223)	238

	As reported	IFRS 16 adjustments	Pre-IFRS 16
For the 26-weeks ended 29 December 2019
Operating segment	£'000	£'000	£'000
Bars	1,335	(699)	636
Pier	1,820	(20)	1,800
Golf	1,446	(478)	968
Head office costs	(521)	-	(521)
EBITDA (after highlighted items)	4,080	(1,197)	2,883

The apportionment of other alternative performance measures can be reconciled to statutory measures as follows:

	2020				2019
	26 week period to 29 December 2019	26 week period to 28 June 2020	52 week period to 28 June 2020	26 week period to 30 December 2018		26 week period to 30 June 2019	52 week period to  30 June 2019
	£'000	£'000	£'000	£'000		£'000	£'000
Group revenue:
Bars division	6,602	2,276	8,878	6,627		6,218	12,845
Pier division	7,936	1,523	9,459	7,854		6,841	14,695
Golf division	2,793	1,491	4,284	2,053		2,429	4,482
Total revenue	17,331	5,290	22,621	16,534		15,488	32,022
Group operating profit/(loss) before highlighted items	2,491	(3,528)	(1,037)	1,977		1,749	3,726
Highlighted items	(110)	(8,007)	(8,117)	(303)		(254)	(557)
Group operating profit/(loss) after highlighted items	2,381	(11,535)	(9,154)	1,674		1,495	3,169
Profit before tax and highlighted items	1,956	(4,046)	(2,090)	1,741		1,505	3,246
Highlighted items	(110)	(8,007)	(8,117)	(303)		(254)	(557)
Profit after tax and highlighted items	1,846	(12,053)	(10,207)	1,438		1,251	2,689
Earnings/(loss) per share:
Basic (pence)	3.9	(29.4)	(25.5)	3.5		2.6	6.1
Basic (with highlighted items added back) (pence)	4.1	(9.4)	(5.3)	4.3		3.0	7.3
Diluted (pence)	3.9	(29.4)	(25.5)	3.4		2.7	6.1
Diluted (with highlighted items added back) (pence)	4.1	(9.4)	(5.3)	4.3		3.0	7.3
Cash flows generated from/(used in) operations	3,791	(3,229)	562	1,029		2,184	3,213

7.  Impact of change in accounting policy

On 1 July 2019, the Group adopted a new accounting standard, IFRS 16 Leases.

The new standard replaced IAS 17 Leases and fundamentally altered the classification and measurement of operating leases for lessees, removing the distinction between operating and finance leases.

The Group's leases predominantly relate to long-term property leases in the Bars and Golf divisions. In the prior period, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Lease liabilities are initially measured as the total payments required under the terms of the lease, discounted by the incremental borrowing rate or the rate implicit in the lease to account for time value of money. On transition to IFRS 16, a discount rate of 3% was used This represented the weighted average incremental borrowing rate at that time.

The Group adopted IFRS 16 on a modified retrospective basis, meaning comparative period information has not been restated, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.

The standard also permits a choice on initial adoption, on a lease-by-lease basis, to measure the right-of-use asset at either its carrying amount as if IFRS 16 had been applied since the commencement of the lease, or an amount equal to the lease liability, adjusted for accrued or prepaid rent and lease incentives. In all cases, the Group has opted to measure the right-of-use asset at an amount equal to the lease liability, adjusted for accrued or prepaid rent and lease incentives.

When applying IFRS 16, the Group has applied the following practical expedients, on transition date:

-  Reliance on the previous identification of a lease (as provided by IAS 17) for all contracts that existed on the date of initial application;

-  Reliance on previous assessments on whether leases are onerous instead of performing an impairment review;

-  Exclusion of initial direct costs from the measurement of the right of use asses at the date of initial application;

-  The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short term leases; and

-  The use of hindsight, such as determining the lease term if the contract contains options to extend or terminate the lease.

The Group has applied the following key judgements and estimates when applying IFRS 16:

-  The present value of lease liabilities relating to property were measured using the Group's incremental borrowing rate of 3%. All other leases were discounted using the rate implicit in the lease.

-  When determining the lease term where extension or termination options exist, all facts and circumstances that may create an economic incentive to exercise an extension option, or not exercise a termination option, have been considered to determine the lease term. Extension periods (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

	£'000
Minimum operating lease commitment at 30 June 2019 (restated)	28,031
Plus: effect of extension options reasonably certain to be exercised	1,500
Undiscounted lease payments	29,531
Less: effect of discounting at the date of initial application	(5,867)
Lease liability as at 1 July 2019	23,664

Impact on consolidated balance sheet

The adoption of IFRS 16 impacted the opening consolidated balance sheet as at 1 July 2019 as follows:

	As reported at 30 June 2019	IFRS 16 adjustments	As at 1 July 2019
	£'000	£'000	£'000
Non current assets
Intangible assets	12,715	-	12,715
Property, plant & equipment	27,169	-	27,169
Right-of-use assets	-	23,183	23,183
Net investment in finance leases	-	121	121
Other receivables due in more than one year	367		367
	40,251	23,304	63,555
Current assets
Inventories	624	-	624
Trade and other receivables	1,564	(458)	1,106
Cash and cash equivalents	2,725	-	2,725
	4,913	(458)	4,455
TOTAL ASSETS	45,164	22,846	68,010
EQUITY
Issued share capital	9,322	-	9,322
Share Premium	15,993	-	15,993
Merger reserve	(1,111)	-	(1,111)
Other reserve	407	-	407
Retained earnings	(167)	-	(167)
Equity attributable to equity shareholders of the parent	24,444	-	24,444
TOTAL EQUITY	24,444	-	24,444
LIABILITIES
Current liabilities
Trade and other payables	5,022	(741)	4,281
Other financial liabilities - current	2,003	-	2,003
Lease liabilities - current	-	1,500	1,500
Income tax payable	393	-	393
Provisions	131	(77)	54
	7,549	682	8,231
Non-Current liabilities
Other financial liabilities - non-current	12,787	-	12,787
Lease liabilities - non-current	-	22,164	21,164
Deferred tax liability	384	-	384
	13,171	22,164	35,335
TOTAL LIABILITIES	20,720	22,846	43,566
TOTAL EQUITY AND LIABILITIES	45,164	22,846	68,010

Impact on operating segment disclosures

Excluding the impact of IFRS 16, the performance of the Group's operating segments was as follows:

		Bars	Brighton Pier	Golf	Total segments	Head office costs	2020 consolidated total
		£'000	£'000	£'001	£'000	£'000	£'000
Revenue		8,878	9,459	4,284	22,621	-	22,621
Cost of sales		(1,704)	(1,561)	(64)	(3,329)	-	(3,329)
Gross profit		7,174	7,898	4,220	19,292	-	19,292
Gross profit %		81%	84%	99%	85%	-	85%
Administrative expenses (excluding depreciation and amortisation)		(7,368)	(7,675)	(3,217)	(18,260)	(820)	(19,080)
Divisional earnings		(194)	223	1,003	1,033	(820)	212
Highlighted items						(8,117)	(8,117)
Depreciation and amortisation						(1,612)	(1,612)
Net finance cost						(398)	(398)
Profit/(loss) before tax		(194)	223	1,003	1,033	(10,947)	(9,914)
Income tax						714	714
Profit/(loss) after tax		(194)	223	1,003	1,033	(10,233)	(9,200)
EBITDA (before highlighted items)		(194)	223	1,003	1,033	(759)	275
EBITDA (after highlighted items)		(194)	223	1,003	1,033	(796)	238

 

END

 

 

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