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Luminar Group Hlgs (LMR)

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Thursday 21 October, 2010

Luminar Group Hlgs

Interim Results

RNS Number : 7589U
Luminar Group Holdings PLC
21 October 2010
 



Luminar Group Holdings plc

 

Condensed consolidated financial information for the 26 weeks to 26 August 2010

 

Luminar Group Holdings plc ("Luminar" or "the Group") is the leading operator of nightclubs in the UK, with 78 clubs as at the end of August 2010 trading predominantly under the brands of Oceana and Liquid.

 


H1

2011

H1

2010β




Revenue (£m)

68.2

86.1

Earnings before Interest, Tax, Depreciation and Amortisation* (£m)

 

13.9

 

20.1

Profit before tax* (£m)

1.8

5.2

(Loss) / Profit before tax from continuing operations (£m)

(35.7)

1.5

Earnings per share* (p)

1.3

5.6

Loss per share (p)

34.1

15.3

Net borrowings (£m)

85.0

104.6

 

*  for continuing operations before exceptional items

β 2010 comparative is reclassified to reflect the composition of discontinued operations at the latest balance sheet date

 

Key Points:

 

·     New management team appointed to return Group's profitability and to restore value for shareholders

·      Credit approved term sheet obtained for new banking facility, subject to documentation

·      New strategy in place following research and analysis of the sector

·      Same outlet sales performance for the seven weeks to 14 October shows a decline of 16.9% year-on-year, which represents an improvement on the 20.2% decline on the same basis for the 26 weeks to 26 August 2010.

·      Continued cost control has mitigated the effects of the sales reduction

 

Simon Douglas, Chief Executive, said:

 

 "The difficult trading environment experienced during the second half of the last financial year continued into the first half of this year.  Despite this, we continued to generate cash and reduce net debt. We now have a clear picture of the strategy we believe is appropriate to reverse the downward trend. Management actions are showing encouraging signs of driving footfall and volume. The Board believes that the Group is now on the right path, although at the very beginning, of returning value to Luminar's shareholders."

 

21 October 2010

 

 

Enquiries:






Luminar Group Holdings plc


Tel: 01908 544100

Simon Douglas, Chief Executive



Philip Bowcock, Finance Director






College Hill


Tel: 020 7457 2020

Matthew Smallwood



Jamie Ramsay





Trading in the period continued to be difficult with significantly reduced sales, primarily derived from fewer customer admissions. However, the Group's operations continue to generate cash and net borrowings reduced to £85.0m at the end of the period.

 

Revenue in the continuing business for the 26 weeks to 26 August 2010 was 20.8% below the same period in the previous year, with same outlet sales down 20.2%.  Profit before tax in the first half for the continuing business, excluding exceptional items, was £1.8m, compared to £5.2m in the same period in the previous year.     

 

A new management team, which was appointed during the period, has already instigated a number of initiatives and actions to fully understand the issues in the business, creating a strategy to lead the business back to long term growth and retain the Group's position as the leading specialist nightclub operator in the UK.

 

Of paramount importance to the sustainability of the Group was to stabilise the Group's financial position.  The Group today announces that it has secured a new credit approved term sheet, subject to documentation which, when completed, will provide financial security to the Group.

 

Outline Strategy

 

Following research and evaluation of the business, the following key strategic aims have been ascertained:

 

·      to optimise the trading estate;

·      to refresh the customer proposition based on feedback and research; and

·      to have a financial structure more suitable for the current size of the Group.

 

In the short term and over the next year, the Group intends to continue to manage operations and its finances tightly, optimise the shape of the Group by disposing of non-core assets, continue to review the Group's products and make changes where necessary, effectively manage key trading events and support all of this through a greatly enhanced marketing strategy led by e-commerce.

 

Much of this is already happening with initial inroads being made into reversing the decline of revenue.

 

Operational Change

 

Detailed market research was commissioned and completed to enable us to better understand the expectations of our customers in the late night industry. This shows that our customers regard appropriate music as being a key factor for a good night out and that they are developing an increasingly diverse range of musical tastes. Therefore, in addition to our mainstream dance sessions and the speciality nights offered at a local level, we have partnered with Ministry of Sound to address this diversity of musical tastes. Ministry of Sound is a world-leading dance brand and in conjunction with them we are now able to offer a series of events under their well-known dance brands such as Hed Kandi and Dance Nation. We have also undertaken a thorough review of our DJ's to ensure they are providing an experience that our customers demand.

 

Our research also indicates that it is important to our customers that they are able to attend live performances by well-known acts or artists. To cater for this demand, we have signed up live acts such as Calvin Harris and Basshunter to perform in our clubs.

 

Many of our customers are students and so we have launched "Fuzzy Logic", a new brand aimed specifically at the student market. Launched during the important trading period of Freshers' Week, it is already proving extremely popular in university cities and towns.

 

We have reviewed our drinks range and pricing policies to make it more customer focused.  Our range now includes cocktails and premium brands so that our clubs can cater for as wide a variety of tastes as possible.

 

All of these initiatives are being introduced into our clubs and the feedback to date has been positive.  These initiatives, along with excellent customer service, will drive an increase in admissions and sales.

 

Over the coming half year, we will begin to selectively refurbish a number of our clubs. These refurbishments will be aimed at improving the customer experience and so drive more admissions. In addition we will be re-opening our club in Norwich in the second half of the financial year. It will be launched under the new 'Project' brand and will unveil our latest concepts, which are aimed at providing a complete night out for our customers.

 

We have developed our estate plan during the period to ensure we are operating in the optimum locations. As a result, we have disposed of 4 properties in the 26 weeks to 26 August 2010 generating net sales proceeds of £3.4m. We will continue to review our estate on an ongoing basis.

 

Results and financial review

 

Overall sales in the continuing business for the period totalled £68.2m, a reduction of 20.8% on the previous year. 

 

On a same outlet basis over a constant estate of 76 venues, sales fell in the first half by 20.2% over the same period last year.  Within this same outlet basis, admission revenue fell by 26.5% on footfall down by 19.1%, while drinks revenue was down by 18.1%.

 

Within the continuing business, average sales per head in the period were £12.33, a decrease of 1.1% over the previous year.  Within this total, average admission income per head fell by 10.0% to £3.15, whilst drink sales per head increased by 1.7% to £8.37. 

 

Overall gross margin of 82.7%, which included 75.8% gross margin on drinks, was slightly below the 83.0% achieved in the first half of last year but exceeded the margins achieved as a whole for last year of 82.6%.  However with lower sales, actual gross profit in the first half of £56.4m was £15.1m lower than the same period in the previous year.

 

Operating costs continue to be tightly controlled with the focus on ensuring that any reductions are not at the expense of customer experience. The operational management of the clubs has been streamlined and we now have four operating divisions across the country, a reduction of three. A centralised support function has been put in place to co-ordinate activities across the estate to ensure that a consistent message and customer experience is being delivered. 

 

Earnings before interest, tax, depreciation and amortisation ("EBITDA") from continuing operations before exceptional items totalled £13.9m in the first half, £6.2m or 31% below that achieved over the same period the previous year due to lower sales. 

 

Lower capital investment in the period combined with the prior year impairment charge contributed to a reduced depreciation and amortisation charge of £8.4m (H1 2010: £11.8m). Net finance costs of £3.6m (H1 2010: £3.0m) are higher than the same period last year as interest receivable in respect of the loan note to The 3D Entertainment Group ("3DE") is no longer recognised. 

 

Profit before tax in the continuing business before exceptional items was £1.8m (H1 2010: £5.2m), which, together with a tax charge of £0.5m, gave rise to basic earnings per share of 1.3p (H1 2010: 5.6p).  Included within the profit before tax is £0.5m of other operating income, being insurance proceeds relating to disruption to an operating venue. 

 

Exceptional items in the continuing operations totalled £37.5m before tax, including asset impairments of £34.3m. This is a consequence of the further continued decline in trading seen during the past six months, which has resulted in a revised discounted cash flow. Restructuring and reorganisation costs of £0.9m and a loss on the disposal of 4 properties of £2.3m are also included in the exceptional charge. 

 

Discontinued operations after tax contributed a loss of £3.1m, of which £2.9m represented exceptional costs in the period in respect of a loss on disposal of discontinued operations.

 

Net loss from continuing and discontinued operations for the 26 weeks to 26 August 2010 was £34.2m (H1 2010: loss of £9.6m). 

 

The Group continues to generate cash.  Net cash inflow from operations in the first half was £8.3m (H1 2010: £5.8m).  Timing factors caused more cash expenditure to fall in the same period in the previous year.  In addition, the net cash inflow in the first half benefited from a VAT refund of £1.4m in respect of VAT overpaid on gaming machine income.  Capital expenditure was restricted to replacements only and totalled £0.5m (H1 2010: £2.5m).  No corporation tax was paid in the period, with no tax expected to be paid this financial year.

 

In addition to cash generated from operations, Luminar raised net proceeds of £3.4m from the sale of 4 properties.  These proceeds increased the cash held on the balance sheet at 26 August 2010 to £55.0m and reduced the Group's net borrowings to £85.0m (H1 2010: £104.6m).

 

The Group's existing borrowings comprise a syndicated loan facility which runs to August 2012 with a maximum drawdown of £175.0m and interest costs of up to LIBOR plus 0.75%. We continue to trade within covenant tests, with an adjusted EBITDA to net debt ratio of 2.9 for the period ended 26 August 2010. 

 

Strengthening our financial position

 

As noted in the previous announcements, the Group has been in discussions with its banking syndicate on its existing banking facilities. The Group now has attained a credit approved term sheet for a new three year facility, subject to documentation.  The Group anticipates successfully completing the documentation process and entering into this new facility over the next few weeks. Further information will be provided once the refinancing exercise is completed.

 

Current trading and outlook

 

The difficult trading environment experienced through the 26 weeks to 26 August 2010 has improved over the seven weeks to 14 October 2010. Compared to the same period last year same outlet sales were down 16.9%. Same outlet admissions were down 14.7% with admission income down 20.1% and drink sales down 16.3%. The introduction of the initiatives described in this report are key to this improvement and management are committed to ensuring that our clubs deliver an experience that our customers demand. 

 

Whilst the Group believes that the initiatives and actions taken will provide the foundations for the recovery of performance and restoration of shareholder value, the unhelpful macro-economic environment that impacts on our customers' behaviour patterns and their ability to spend means any recovery is expected to be fragile.

 

Related parties

 

Related party transactions are disclosed in note 16 to the condensed consolidated financial information.

 

Principal risks and uncertainties

 

The principal risks and uncertainties that could affect the Group's business in the remaining six months of the financial year are summarised below.  Further details of the Group's risk profile can be found in the 2010 Annual Report.

 

The key risk continues to be that of continued or worsening economic conditions, particularly as they affect young people.  The Group competes for a share of the disposable income of its customers with a wide range of other leisure activities and should that income reduce, through greater unemployment or other economic factors, then revenues available to the Group may reduce. 

 

The seasonal pattern of the Group's income places great importance on trade over the Christmas and New Year period.  Environmental factors such as very poor weather, or high incidence of virus infections or other factors could deter customers from visiting the Group's venues.

 

The Group benefits from a syndicated loan facility which extends until August 2012.  As outlined above, the Group has also received a credit approved term sheet for a new three year facility, subject to documentation, which will replace the existing facility.  The Directors consider the likelihood of the new facility not concluding successfully to be remote.

 

The Group's projections indicate that cash and EBITDA will be generated over the forthcoming year sufficient for the Group to remain within the covenants under the new facility.  However, given the fragile nature of the economic recovery, in the event of a continued deterioration in market conditions the Directors recognise there is potential for budgeted headroom on the covenants to be eroded.  The Directors have identified available mitigating actions that would be pursued to protect covenant headroom if trading results decline against projections.

 

In the remote event that the new facility is not entered into, the Group will continue to trade under its existing facility.  The Group's covenant headroom under the existing facility will be at significantly lower levels than under the new facility, hence more stringent mitigating actions would need to be successfully pursued.  Breach of the covenants would allow the bank to require immediate repayment of the debt.

 

However, as noted above, the Directors consider the likelihood of the new facility not being completed successfully to be remote, and therefore the Directors are satisfied that the Group will continue to operate within its covenants and that adequate financial resources are available to the Group within circumstances that can be reasonably foreseen.

 

Forward-looking statements

 

Certain statements in this consolidated financial information for 26 weeks ended 26 August 2010 are forward-looking.  Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.  Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

 

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

Luminar Group Holdings plc

Luminar House

Deltic Avenue

Rooksley

Milton Keynes, Bucks

MK13 8LW

 

By order of the Board

 

Simon Douglas

Philip Bowcock

20 October 2010

20 October 2010

Chief Executive

Finance Director

 

Statement of Directors' responsibilities

 

The Directors confirm that this condensed financial information has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

-    an indication of important events that have occurred during the first six months and their impact on the condensed consolidated financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

-    material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

 

The Directors of Luminar Group Holdings plc are listed in the Luminar Group Holdings plc Annual Report for the year ended 25 February 2010.  A list of current Directors is maintained on the Luminar Group Holdings plc website: www.luminar.co.uk.

 

By order of the Board

 

 

Simon Douglas

Philip Bowcock

20 October 2010

20 October 2010

Chief Executive

Finance Director

 

Independent review report to Luminar Group Holdings plc

 

Introduction

 

We have been engaged by the company to review the condensed consolidated financial information for the half year ended 26 August 2010, which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Net Debt Statement, the Consolidated Statement of Changes in Shareholders' Equity, and the notes to the condensed consolidated financial information. We have read the other information contained in the condensed consolidated financial information for the half year ended 26 August 2010 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

 

The condensed consolidated financial information for the half year ended 26 August 2010 is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the condensed consolidated financial information in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial information for the half year ended 26 August 2010 has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed consolidated financial information for the half year ended 26 August 2010 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial information for the half year ended 26 August 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

St Albans

20 October 2010

 

Notes:

 

(a)   The maintenance and integrity of the Luminar Group Holdings plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website.

 

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 



Consolidated Income Statement

    for the half year ended 26 August 2010

 


Half year ended 26 August 2010 (unaudited)

Half year ended 27 August 2009 (unaudited) (reclassified**)

 


 

 

 

Note

Pre-

exceptional

items

£m

Exceptional

items

(note 9)

£m

Total

 

 

£m

Pre-

exceptional

items

£m

Total

 

 

£m

Continuing operations








Revenue

4

68.2

-

68.2

86.1

-

86.1









Cost of sales


(11.8)

-

(11.8)

(14.6)

-

(14.6)

Gross profit


56.4

-

56.4

71.5

-

71.5









Administrative expenses


 

(51.5)

 

(37.5)

 

(89.0)

 

(63.3)

 

(3.7)

 

(67.0)

Other operating income


 

0.5

 

-

 

0.5

 

-

 

-

 

-

Profit / (loss) from operations

 

4

 

5.4

 

(37.5)

 

(32.1)

 

8.2

 

(3.7)

 

4.5









Finance income

5

0.6

-

0.6

1.1

-

1.1









Finance costs

5

(4.2)

-

(4.2)

(4.1)

-

(4.1)

Profit / (loss) before taxation


 

1.8

 

(37.5)

 

(35.7)

 

5.2

 

(3.7)

 

1.5









Tax on profit / (loss)

6

(0.5)

5.1

4.6

(1.7)

0.5

(1.2)

Profit / (loss) for the period from continuing operations attributable to equity shareholders


 

 

 

 

 

1.3

 

 

 

 

 

(32.4)

 

 

 

 

 

(31.1)

 

 

 

 

 

3.5

 

 

 

 

 

(3.2)

 

 

 

 

 

0.3









(Loss) / profit from discontinued operations *

 

 

10

 

 

(0.2)

 

 

(2.9)

 

 

(3.1)

 

 

0.2

 

 

(10.1)

 

 

(9.9)

Profit / (loss) for the period attributable to equity shareholders


 

 

 

1.1

 

 

 

(35.3)

 

 

 

(34.2)

 

 

 

3.7

 

 

 

(13.3)

 

 

 

(9.6)

Loss per share from continuing and discontinued operations

8







Basic




(34.1p)



(15.3p)

Diluted




(34.1p)



(15.3p)

 

*    The loss from discontinued operations is stated after tax

**  Reclassified to reflect the composition of discontinued operations at the latest balance sheet date

 

    Consolidated Statement of Comprehensive Income

    for the half year ended 26 August 2010

 


Half year ended

26 August 2010

Half year ended

27 August 2009


(unaudited)

(unaudited)


£m

£m

Loss for the period

(34.2)

(9.6)

Other comprehensive income:



Cash flow hedges (net of tax)

(0.5)

1.1

Other comprehensive income for the period, net of tax

(0.5)

1.1

 



Total comprehensive income for the period attributable to equity shareholders                                                  

 

(34.7)

 

(8.5)



Consolidated Balance Sheet

As at 26 August 2010

 

 

 

 

 

 

Note

26 August 2010

(unaudited)

£m

27 August 2009

(unaudited)

£m

25 February 2010 (audited)

£m

Non-current assets





Goodwill


130.8

171.9

130.8

Other intangible assets


2.3

2.5

2.6

Property, plant and equipment                     


177.0

297.7

226.9

Other non-current assets


1.5

2.0

1.9

Trade and other receivables


-

17.3

-

 


311.6

491.4

362.2

Current assets





Inventories


1.8

2.4

1.5

Trade and other receivables


10.9

11.8

5.6

Cash and cash equivalents


44.8

45.4

37.3

Monies on deposit


10.2

-

10.0

 

Assets classified as held for sale       

 

10

67.7

3.2

59.6

2.4

54.4

2.1

 


70.9

62.0

56.5






Total assets


382.5

553.4

418.7






Current liabilities





Trade and other payables


(18.0)

(12.1)

(14.1)

Current tax liabilities


(43.8)

(45.0)

(42.8)

Deferred income


(0.5)

(0.5)

(0.5)

Provisions


(1.5)

(1.9)

(2.3)



(63.8)

(59.5)

(59.7)

Liabilities classified as held for sale

10

(0.7)

(4.0)

(0.7)



(64.5)

(63.5)

(60.4)






Net current assets / (liabilities)


6.4

(1.5)

(3.9)

Total assets less net current assets / (liabilities)


318.0

489.9

358.3






Non-current liabilities





Borrowings and loans

13

(140.0)

(149.8)

(139.9)

Derivative financial instruments


(14.5)

(11.9)

(13.8)

Deferred income


(5.7)

(6.0)

(6.1)

Obligations under finance leases


(7.9)

(7.9)

(7.9)

Provisions


(2.6)

(0.7)

(2.9)

Deferred tax liabilities


(2.0)

(18.9)

(7.9)



(172.7)

(195.2)

(178.5)






Net assets


145.3

294.7

179.8






Capital and reserves





Share capital

14

25.1

131.8

131.8

Share premium


25.8

25.8

25.8

Capital redemption reserve

14

148.8

42.1

42.1

Equity reserve


1.9

1.4

1.7

Retained earnings


(56.3)

93.6

(21.6)

 

Shareholders' equity


 

145.3

 

294.7

 

179.8

 

 



Consolidated Cash Flow Statement

for the half year ended 26 August 2010

 


 

 

 

Note

Half year ended

26 August 2010

(unaudited)

£m

Half year ended

27 August 2009

(unaudited)

£m

Cash flows from operating activities




Net cash inflow from operations

11

8.3

5.8

Finance costs paid


(4.1)

(4.0)

Tax received


-

2.2

 




 


4.2

4.0

Cash flows from investing activities




Purchase of property, plant and equipment


(0.5)

(2.5)

Purchase of intangible assets


-

(0.1)

Net proceeds from sale of property, plant and equipment


3.4

0.4

Finance income received


0.4

-

 




 


3.3

(2.2)

Cash flows from financing activities




Repayment of long-term borrowings


-

(20.0)

Net proceeds from issue of shares


-

35.7

 




 


-

15.7

 




Net increase in cash and cash equivalents


7.5

17.5

 




Cash and cash equivalents at beginning of period


37.3

27.9

 




Cash and cash equivalents at end of period


44.8

45.4

 

 

 

Net Debt Statement

for the half year ended 26 August 2010

 



Half year ended

26 August 2010

Half year ended

27 August 2009

Year ended

25 February 2010



(unaudited)

(unaudited)

(audited)


Note

£m

£m

£m

Net increase in cash in the period / year


(7.5)

(17.5)

(9.4)

Cash outflow from monies being placed on deposit


(0.2)

-

(10.0)

Cash outflow from repayment of debt


-

(20.0)

(30.0)

 





Movement in net debt in the period / year


(7.7)

(37.5)

(49.4)

 





Opening net debt


100.6

150.0

150.0

 





Closing net debt

11

92.9

112.5

100.6



Consolidated Statement of Changes in Shareholders' Equity (unaudited)

for the half year ended 26 August 2010

 

 


Share capital

 

£m

Share premium

 

£m

Capital redemption reserve

£m

Equity reserve

 

£m

Retained earnings

 

£m

Total

 

 

£m

Brought forward at 27 February 2009

121.9

-

42.1

1.2

102.1

267.3

Total comprehensive income for the year

-

-

-

-

(8.5)

(8.5)

Share-based payment charge

-

-

-

0.2

-

0.2

Issue of shares

9.9

25.8

-

-

-

35.7

Carried forward at 27 August 2009

131.8

25.8

42.1

1.4

93.6

294.7

 







 







Brought forward at 26 February 2010

131.8

25.8

42.1

1.7

(21.6)

179.8

Total comprehensive income for the year

-

-

-

-

(34.7)

(34.7)

Cancellation of deferred shares

(106.7)

-

106.7

-

-

-

Share-based payment charge

-

-

-

0.2

-

0.2

Carried forward at 26 August 2010

25.1

25.8

148.8

1.9

(56.3)

145.3



Notes to the condensed consolidated financial information

for the half year ended 26 August 2010

 

1          General information

 

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Luminar House, Deltic Avenue, Rooksley, Milton Keynes, Bucks, MK13 8LW.

 

The Company is listed on the London Stock Exchange.

 

This condensed consolidated financial information for the half year ended 26 August 2010 was approved for issue on 20 October 2010.

 

This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 25 February 2010 were approved by the Board of Directors on 12 May 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 

This condensed consolidated interim financial information has been reviewed, not audited.

 

2                Basis of preparation

 

This condensed consolidated financial information for the half year ended 26 August 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 25 February 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

3                Accounting policies

 

Except as described below, the accounting policies adopted are consistent with those of the annual financial statements for the year ended 25 February 2010, as described in those annual financial statements.

 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 26 February 2010.

 

Amendments to IFRS 2, Share-based payments, effective for annual periods beginning on or after 1 January 2010.  These amendments provide a clear basis to determine the classification of share based payment awards in both consolidated and separate financial statements.  The amendments incorporate IFRIC 8 and IFRIC 11 into the standard.  The amendment also clarifies inconsistencies within the definitions section of IFRS 2.  This amendment has not had any material impact on the Group.

 

Amendment to IAS 39, Financial instruments:  Recognition and measurement on eligible hedged items, effective for annual periods beginning on or after 1 July 2009.  This amendment makes two significant changes.  It prohibits designating inflation as a hedgeable component of a fixed rate debt.  It also prohibits including time value in one-sided hedged risk when designating options as hedges.  The impact of this change must be applied retrospectively in accordance with IAS 8, Accounting Policies.  Management have considered the impact of this amendment at 26 August 2010 and determined that there is no material impact of this change on the result stated for the half year ended 27 August 2009.

 

IFRS 3 (revised), Business combinations, effective for annual periods beginning on or after 1 July 2009.  The main changes to this standard are that directly attributable costs such as advisers' fees and stamp duty will be charged to the income statement, revisions to contingent cash consideration in the period following the acquisition will be recorded in the income statement and any difference between the fair value of the consideration in the buy out of minority interests and the value of their reported minority interest will be recorded against equity rather than goodwill.  The Group will apply IFRS 3 (revised) to any relevant transactions from 26 February 2010 onwards.

 

4                Segmental information

               

As reported at 25 February 2010, the Group has adopted IFRS 8 'Operating segments'.

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (CODM) to allocate resources to the segments and to assess their performance.

We report our segment information on the same basis as our internal management reporting structure, which drives how our company is organised and managed.

The Group is principally engaged as owner, developer and operator of nightclubs and themed bars in the UK. The CODM has been identified as the Senior Executive Management (SEM) that exercises the day-to-day management function of the Group. Operational and financial information, which is primarily at an individual club level, is received by the CODM on a monthly basis. Luminar do not distinguish between geography or brand. The club information does not meet the quantitative thresholds as required by IFRS 8, as such management have judged it appropriate to aggregate the financial information relating to all clubs into a single reportable segment.

All revenue is earned from sales to external customers.


5          Net finance costs

 

Net finance costs relating to continuing operations were as follows:

 


Half year ended

26 August 2010

£m

Half year ended

27 August 2009

£m

Interest payable on bank borrowings

(3.8)

Interest payable on obligations under finance leases

(0.2)

Amortisation of issue costs on bank loan

(0.1)

Finance costs

(4.2)

(4.1)




Income on bank deposits

0.4

-

Interest on loan to associate

-

0.9

Other interest receivable

0.2

-

Fair value movements on derivatives that do not meet the hedge accounting criteria

 

-

 

0.2

Finance income

0.6

1.1

Net finance costs

(3.6)

(3.0)

 

6          Tax on (loss) / profit

 

The taxation charge is based on the (losses) / profits for the period and represents:

 


Half year ended

26 August 2010

 

£m

Half year ended

27 August 2009 (reclassified*)

£m

Current tax (charge) / credit


Continuing operations:


- Current period

(2.3)

- Adjustments in respect of prior periods

0.2



Discontinued operations:


- Current period

2.0


(1.0)

(0.1)




Deferred tax credit / (charge)


- Continuing operations

0.9

- Discontinued operations

-

0.4


5.7

1.3




Total taxation credit / (charge)



- Continuing operations

(1.2)

- Discontinued operations

0.1

2.4


4.7

1.2

 

Income tax expense is recognised based on management's best estimate of the full year effective rate of tax which is then applied to the first half year results.

 

Luminar's policy is to recognise liabilities for uncertain tax positions relating to open tax years, based on management's assessment of the potential outcomes at the balance sheet date.  During the half year a tax charge of £0.5m (H1 2010: £1.7m*) was recognised against a continuing profit before taxation pre-exceptional items figure of £1.8m (H1 2010: £5.2m*).  This gives an effective rate of 30.9% (H1 2010: 31.5%*), which is broadly comparable with that for the prior year half year end.

 

*  Reclassified to reflect the composition of discontinued operations at the latest balance sheet date



7          Dividends

 

As reported in the Annual Report approved on 12 May 2010, the Board did not recommend a final dividend for the year ended 25 February 2010.  No interim dividend payment is proposed for the half year ended 26 August 2010.

 

8          (Loss) / Earnings per share

 

The calculation of basic earnings per share (EPS) is calculated by dividing the earnings attributed to equity shareholders by the weighted average number of shares in issue during the half year. For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: share options granted to Directors and employees where the exercise price is less than the average market price of the Group's ordinary shares during the half year; and the contingently issuable shares under the Group's long-term incentive plan.  At the half year end an assessment is made as to whether the performance criteria for the vesting of awards under the share option schemes of the Group is likely to be met and any potential shares unlikely to be exercised are excluded from the diluted EPS calculation.

 

An alternative measure of earnings per share has also been presented below, that being earnings per share from continuing operations pre-exceptional items, as the Directors believe that this measure of pre-exceptional earnings from continuing operations is more reflective of the ongoing trading of the Group.

 

A reconciliation of the earnings and weighted average number of shares used in the calculations is set out below:

 


Half year ended 26 August 2010


 

 

(Loss) / Earnings

£m

Weighted average number of shares

(in millions)

 

 

Per share amount

(pence)

Basic and diluted EPS




Loss attributable to ordinary shareholders

(34.2)

100.4

(34.1)





Basic and diluted EPS from continuing operations

 

(31.1)

 

100.4

 

(31.0)





Basic and diluted EPS from discontinued operations

 

(3.1)

 

100.4

 

(3.1)





EPS from continuing operations pre-exceptional items

 

 



Basic and diluted EPS from continuing operations pre-exceptional items

 

1.3

 

100.4

 

1.3

 

 


Half year ended 27 August 2009 (reclassified)


 

(Loss) / Earnings

(reclassified)

£m

Weighted average number of shares

(in millions)

 

 

Per share

amount

(pence)

Basic and diluted EPS




Loss attributable to ordinary shareholders

(9.6)

62.7

(15.3)





Basic and diluted EPS from continuing operations

 

0.3

 

62.7

 

0.5





Basic and diluted EPS from discontinued operations

 

(9.9)

 

62.7

 

(15.8)





EPS from continuing operations pre-exceptional items




Basic and diluted EPS from continuing operations pre-exceptional items

 

3.5

 

62.7

 

5.6

 

All amounts included in the column headed '(Loss) / Earnings' are taken from the face of the Consolidated Income Statement.

 

At 26 August 2010, as the Group is loss-making, any share options in issue are considered to be 'anti-dilutive' based on the exercise price and the weighted average market price and as such, the calculation is the same for both basic and diluted earnings per share.

 

9          Exceptional items

 

(a)  Continuing operations

 

The comparative income statement is reclassified at each balance sheet date to reflect the composition of discontinued operations at the latest balance sheet date.

 

The Group incurred exceptional items on continuing operations as follows:

 


Half year ended

26 August 2010

 

£m

Half year ended

27 August 2009 (reclassified)

£m

Exceptional items relating to trading



Impairment of property, plant and equipment

(34.0)

(0.1)

Impairment of lease premiums

(0.3)

(1.8)

Provision for loss on liquidation of supplier

-

(0.8)

Provision for onerous lease commitments

-

(0.2)

Realised loss on disposals

(2.3)

-

Costs relating to reorganisation and rationalisation

(0.9)

(0.8)

Pre-tax exceptional items relating to continuing operations

 

(37.5)

 

(3.7)

Tax on exceptional items

5.1

0.5

Post-tax exceptional items relating to continuing operations

 

(32.4)

 

(3.2)

 

Impairments of £34.3m (H1 2010: £1.9m) relate to property, plant and equipment (£34.0m) and lease premiums (£0.3m), reflecting the difference between the value in use of cash generating units (e.g. discrete trading clubs) and their carrying value.  Management continue to keep the Property, Plant and Equipment and Goodwill under review for impairment given the uncertainty over the economic recovery.

 

A provision of £0.8m was recognised in the period to 27 August 2009 in relation to anticipated losses arising from the liquidation of Eminence Leisure Limited, a key supplier of DJ's and live acts to the Group, and in which the Group held a 20% equity share.  This amount remains fully provided for at 26 August 2010.

 

The loss on disposal of £2.3m relates to the disposal of 4 clubs and represents the difference between the net sales proceeds received of £3.4m and the carrying value of the clubs at the date of disposal of £5.7m.

 

(b) Discontinued operations

 

The comparative income statement is reclassified at each balance sheet date to reflect the composition of discontinued operations at the latest balance sheet date.

 

The Group incurred exceptional items relating to discontinued operations as follows:

 


Half year ended

26 August 2010 

 

£m

Half year ended

27 August 2009 (reclassified)

£m

Impairment of property, plant and equipment

(0.1)

(1.6)

Net increase in provision for onerous lease commitments

(0.2)

(0.3)

Impairment of investment in associate

-

(3.6)

Provision against receivable due from associate

-

(6.3)

Realised loss on disposals

(2.4)

-

Costs relating to reorganisation and rationalisation

(0.2)

(0.3)

Pre-tax exceptional items relating to discontinued operations

 

(2.9)

 

(12.1)

Tax on exceptional items

-

2.0

Post-tax exceptional items relating to discontinued operations

 

(2.9)

 

(10.1)

 

An impairment of £3.6m was recognised in the period to 27 August 2009 against the carrying value of the investment held in The 3D Entertainment Group Limited ("3DE").  In addition, £6.3m was provided in the same period against the receivable balance due from 3DE in relation to a Vendor Loan Note and associated accrued interest.  See note 16 for further details.   



 

10        Discontinued operations and non-current assets held for sale

 

The comparative income statement is reclassified at each balance sheet date to reflect the composition of discontinued operations at the latest balance sheet date.

 

(a) Results of discontinued operations

 

The results of discontinued operations, which comprise clubs either disposed of, or held for sale and forming part of the Group's plan to exit from non-core operations, included within the Consolidated Income Statement were as follows:


Half year ended

26 August 2010

Half year ended

27 August 2009 (reclassified)


£m

£m

Revenue

0.4

2.6

Cost of sales and administrative expenses

(0.7)

(2.8)

Loss before tax pre-exceptional items

(0.3)

(0.2)

Attributable tax credit

0.1

0.4

(Loss) / profit after tax pre-exceptional items

(0.2)

0.2

Exceptional items (see note 9)

(2.9)

(12.1)

Attributable tax credit

-

2.0

Loss from discontinued operations

(3.1)

(9.9)

 

 

 (b) Assets and liabilities of clubs held for sale

 

At 26 August 2010 nine clubs were classified as held for sale.

 

The major classes of assets and liabilities comprising the clubs classified as held for sale were as follows:

 


26 August 2010

27 August 2009

25 February 2010


£m

£m

£m

Property, plant and equipment

2.9

2.3

2.0

Inventories

0.1

-

-

Trade and other receivables

0.2

0.1

0.1

Total assets classified as held for sale

3.2

2.4

2.1





Trade and other payables

(0.1)

(0.2)

(0.1)

Provisions

(0.6)

(3.7)

(0.5)

Deferred tax liabilities

-

(0.1)

(0.1)

Total liabilities classified as held for sale

(0.7)

(4.0)

(0.7)





Net assets / (liabilities) classified as held for sale

 

2.5

 

(1.6)

 

1.4



 

11        Cash flow from operating activities and reconciliation of movement in net   

            debt

 

A reconciliation of net cash inflow from operations is provided below:

 


Half year ended

26 August 2010

Half year ended

27 August 2009 (reclassified)


£m

£m

(Loss) / profit before taxation - continuing operations

(35.7)

1.5

Loss before taxation - discontinued operations

(3.2)

(12.3)

Loss before taxation

(38.9)

(10.8)

Depreciation and amortisation

8.4

11.8

Amortisation of lease premiums

0.1

0.1

Amortisation of issue costs on bank loan

0.1

0.1

Impairment of property, plant and equipment

34.1

1.7

Impairment of lease premiums

0.3

1.8

Impairment of investment in associate

-

3.6

Movement in exceptional accrued costs and provisions

(0.6)

5.0

Loss on sale of property, plant and equipment

4.7

0.3

Non-cash charges for share-based payments

0.2

0.2

Net finance costs

3.6

3.0

 



 

12.0

16.8

Increase in inventories

(0.4)

(0.3)

Increase in receivables

(6.1)

(4.2)

Increase / (decrease) in trade and other payables

3.4

(6.1)

Decrease in provisions

(0.6)

(0.4)

Net cash inflow from operations

8.3

5.8

 

The movement in net debt during the half year is analysed as follows:

 


25 February 2010

£m

Cash flow

£m

26 August 2010

£m

Cash and cash equivalents

37.3

7.5

44.8

Monies on deposit

10.0

0.2

10.2

Loans due in more than 1 year

(140.0)

-

(140.0)

Cash net debt

(92.7)

7.7

(85.0)

Finance leases

(7.9)

-

(7.9)

Net debt

(100.6)

7.7

(92.9)

 

 

12        Property, plant and equipment

 

During the half year the Group acquired £0.5m (H1 2010: £2.5m) of assets and disposed of £7.4m (H1 2010: £0.6m) of assets.  £8.1m (H1 2010: £11.2m) of depreciation was charged in the half year, and an impairment provision of £34.1m (H1 2010: £1.7m) was recognised.

 

The Group had capital commitments relating to property, plant and equipment of £3.1m at 26 August 2010 (H1 2010: £nil).  Of this amount, £2.4m is recoverable through insurance proceeds relating to disruption to an operating venue.

13        Borrowings and loans

 

Amounts falling due after more than one year were as follows:

 


26 August 2010

£m

27 August 2009

£m

25 February 2010

£m

Non-current:




Bank loan

140.0

150.0

140.0

Issue costs

-

(0.2)

(0.1)


140.0

149.8

139.9

 

The movements in bank loans were analysed as follows:

 


£m



Opening amount as at 27 February 2009

169.7

Repayment of borrowings

(20.0)

Issue costs amortisation

0.1



Closing amount as at 27 August 2009

149.8



Opening amount as at 26 February 2010

139.9

Repayment of borrowings

-

Issue costs amortisation

0.1



Closing amount as at 26 August 2010

140.0

 

14        Share Capital

 

On 30 April 2010, the Deferred Shares were redeemed and cancelled.  This has resulted in a reduction in Share Capital of £106.7m with a corresponding increase in the Capital Redemption Reserve.  The number of Ordinary Shares in issue is unaffected by this transaction.

 

15        Contingent assets and contingent liabilities

 

There are no material contingent assets or liabilities at 26 August 2010. 

 

16        Related party transactions

 

The Group holds a debtor balance with Eminence Leisure Limited of £0.8m in respect of services provided in prior periods.  Eminence Leisure Limited is an associate of the Group and has gone into liquidation.  The debtor balance was fully provided for at 27 August 2009 and remains fully provided for at 26 August 2010.      

 

On 19 January 2007 the Group sold certain trade and assets of its clubs to 3DE (an associate of the Group).  Post completion a transitional services agreement ("TSA") was put in place between the Group and 3DE for the provision of certain services.  A vendor loan note of £19.3m (plus accrued interest totalling £5.3m) remains owed to the Group.  On 26 February 2010, 3DE was placed into administration.  The administration process is ongoing.  From the date of administration, the Group no longer continues to accrue any interest on the 3DE loan notes and have provided no further services under the TSA.  All debtor balances relating to 3DE were fully provided for in the accounts for the year ended 25 February 2010 and remain fully provided for at 26 August 2010. 

 

During the period, a property was sold to No Saints Limited.  Stephen Thomas, who resigned from the Board on 1 March 2010, is a director of that company.  The transaction was in the ordinary course of business and at arm's length.  Net sales proceeds of £0.6m were received and the balance outstanding at 26 August 2010 was £nil.

 

 


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