REG - Marston's Plc - Interim Results <Origin Href="QuoteRef">MARS.L</Origin> - Part 2
15/07/2015 17:32
- Part 2: For the preceding part double click ID:nRSN1139Na
(37.1) .- .- - 13.9 (23.1)
At 5 April 2014 44.4 333.9 536.4 6.8 (74.4) (130.9) 71.5 787.7
NOTES
1 BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
This interim financial information has been prepared in accordance with IAS 34
'Interim Financial Reporting' as adopted by the European Union. The same
accounting policies, presentation and methods of computation are followed in
the interim financial information as applied in the Group's audited financial
statements for the 52 weeks ended 4 October 2014, with the exception of new
standards and interpretations that were only applicable from the beginning of
the current financial year, and a revised presentation of items within cash
and cash equivalents.
The audited financial statements for the 52 weeks ended 4 October 2014 contain
details of the new standards and interpretations now applicable to the Group.
The adoption of these standards and interpretations has had no impact on the
interim financial information.
Some of the prior period balances within cash and cash equivalents that were
originally presented on a net basis in the balance sheet and the relevant
notes have been represented on a gross basis to more accurately reflect the
underlying transactions and to be consistent with the current period
presentation.
The financial information for the 52 weeks ended 4 October 2014 is extracted
from the audited accounts for that period, which have been delivered to the
Registrar of Companies. The Auditors' report was unqualified and did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The interim financial information does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006. The interim
financial information for the 26 weeks ended 4 April 2015 and the comparatives
to 5 April 2014 are unaudited, but have been reviewed by the Auditors.
The Group does not consider that any standards or interpretations issued by
the International Accounting Standards Board, but not yet applicable, will
have a significant impact on the financial statements for the 52 weeks ending
3 October 2015.
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparing this interim financial information.
2 SEGMENT REPORTING
4 April 2015 5 April 2014
Underlying revenue by segment £m £m
Destination and Premium 187.2 173.9
Taverns 104.4 113.2
Leased 25.1 25.2
Brewing 67.8 62.0
Group Services .- .-
Underlying revenue 384.5 374.3
Non-underlying items 16.0 10.2
Revenue 400.5 384.5
4 April 2015 5 April 2014
Underlying operating profit by segment £m £m
Destination and Premium 31.6 28.6
Taverns 24.1 25.1
Leased 12.4 12.5
Brewing 8.6 7.8
Group Services (10.2) (8.3)
Underlying operating profit 66.5 65.7
Non-underlying operating items (48.5) (55.8)
Operating profit 18.0 9.9
Net finance costs (45.5) (64.7)
Loss before taxation (27.5) (54.8)
Underlying operating profit is a key measure of profitability used by the
chief operating decision maker.
3 NON-underlying items
In order to illustrate the underlying trading performance of the Group,
presentation has been made of performance measures excluding those items which
it is considered would distort the comparability of the Group's results.
These non-underlying items comprise exceptional items and other adjusting
items.
Exceptional items are defined as those items that, by virtue of their nature,
size or expected frequency, warrant separate additional disclosure in the
financial statements in order to fully understand the underlying performance
of the Group. As management of the freehold and leasehold property estate is
an essential and significant area of the business, the threshold for
classification of property related items as exceptional is higher than other
items.
Other adjusting items comprise the revenue and expenses in respect of the
ongoing management of the portfolio of 202 pubs disposed of in the prior
period. Following their disposal these pubs no longer form part of the
Group's core activities and the Group does not have the ability to make
strategic decisions in respect of them. As such it is considered appropriate
to exclude the results of these pubs from the Group's underlying results.
4 April 2015 5 April 2014
£m £m
Exceptional operating items
Non-core estate disposal and reorganisation costs 1.6 18.8
Loss on portfolio disposal of pubs .- 35.8
Impairment of freehold and leasehold properties 39.0 .-
Impact of change in rate assumptions used for onerous lease provisions 5.9 .-
Head office relocation and reorganisation costs 0.9 .-
47.4 54.6
Other adjusting operating items
Results in respect of the ongoing management of pubs in the portfolio disposal 1.1 1.2
1.1 1.2
Non-underlying operating items 48.5 55.8
Exceptional non-operating items
Interest on Rank refunds .- (0.2)
Buyback of securitised debt and associated costs .- 27.2
Movement in fair value of interest rate swaps 8.6 1.0
8.6 28.0
Total non-underlying items 57.1 83.8
Non-core estate disposal and reorganisation costs
During the period ended 5 October 2013 the Group restructured both its pub
estate and its operating segments. Costs in respect of this restructuring
were incurred in both the current and prior period. The prior period
exceptional charge of £18.8 million included an amount of £8.8 million in
respect of the impairment of non-core properties.
Portfolio disposal of pubs
During the prior period the Group disposed of a portfolio of 202 pubs and
subsequently entered into a four year lease and five year management agreement
in respect thereof. The loss on disposal was £35.8 million and revaluation
surpluses of £37.5 million were transferred from the revaluation reserve to
retained earnings upon disposal, giving a net impact of £1.7 million.
The Group no longer has strategic control of these pubs and they do not form
part of its core activities. As such the results in respect of the ongoing
operation and management of these pubs post disposal have been shown as a
non-underlying item, which is comprised as follows:
4 April 2015 5 April 2014
£m £m
Revenue 16.0 10.2
Operating expenses (17.1) (11.4)
(1.1) (1.2)
Impairment of freehold and leasehold properties
At 1 February 2015 the Group's freehold and leasehold properties were revalued
by independent chartered surveyors on an open market value basis. The
resulting revaluation adjustments have been taken to the revaluation reserve
or income statement as appropriate. The amount recognised in the income
statement comprises:
4 April 2015
£m
Impairment of other intangible assets 0.1
Reversal of impairment of other intangible assets (0.2)
Impairment of property, plant and equipment 60.1
Reversal of impairment of property, plant and equipment (26.3)
Impairment of assets held for sale 5.0
Reversal of impairment of assets held for sale (0.1)
Valuation fees 0.4
39.0
Impact of change in rate assumptions used for onerous lease provisions
Due to significant movements in gilt yields and inflation rates in the current
period, the update of the discount and inflation rate assumptions used in the
calculation of the Group's onerous property lease provisions at the current
period end resulted in an increase of £5.9 million in the total provision.
Head office relocation and reorganisation costs
During the current period redevelopment of the Group's head office building in
Wolverhampton commenced along with a reorganisation of certain head office
functions. Costs of £0.9 million were incurred in respect of temporarily
relocating to alternative premises nearby during the period of redevelopment
and in undertaking the reorganisation.
Movement in fair value of interest rate swaps
The Group's interest rate swaps are revalued to fair value at each balance
sheet date. The movement in fair value of interest rate swaps which are not
designated as part of a hedge relationship, and the ineffective portion of the
movement in fair value of interest rate swaps which are accounted for as
hedging instruments, are both recognised in the income statement. The net
loss of £8.6 million (2014: £1.0 million) is shown as an exceptional item. In
addition to this, a loss of £50.4 million (2014: gain of £1.1 million) has
been recognised in the hedging reserve, in relation to the effective portion
of the movement in fair value of interest rate swaps which are accounted for
as hedging instruments.
Impact of taxation
The current tax credit relating to the above non-underlying items amounts to
£1.5 million (2014: £6.3 million). The deferred tax credit relating to the
above non-underlying items amounts to £8.0 million (2014: £6.8 million).
Prior period non-underlying items
In previous periods the Group received refunds totalling £5.9 million from HM
Revenue & Customs (HMRC). This followed Tribunal/Court of Appeal hearings
involving The Rank Group Plc ('Rank'), which concluded that there had been a
breach of fiscal neutrality in the treatment of gaming machine income as
liable to UK VAT. HMRC issued protective assessments to recover the
repayments pending the result of further Court hearings. On 30 October 2013
the Court of Appeal found in favour of HMRC and the Group subsequently repaid
the refunds of £5.9 million plus interest of £0.3 million thereon. In the
period ended 5 October 2013 the Group had recognised a provision for the £5.9
million repayment and interest of £0.5 million. As such there was a reduction
in the interest accrual of £0.2 million in the prior period.
During the prior period the Group repurchased all of its securitised AB1 notes
at par. The notes, with a nominal value of £80.0 million, were immediately
cancelled and the associated floating-to-fixed interest rate swap held in
respect of this tranche of securitised debt was terminated. This swap had
been designated as a cash flow hedge of the forecast floating rate interest
payments arising in respect of the AB1 notes. As these forecast transactions
were no longer expected to occur the cumulative hedging loss of £24.7 million
was recognised in the income statement.
4 FINANCE COSTS AND INCOME
4 April 2015 5 April 2014
£m £m
Finance costs
Unsecured bank borrowings 5.7 6.0
Securitised debt 24.7 25.9
Finance leases 0.5 0.6
Other lease related borrowings 5.1 3.5
Net finance cost in respect of retirement benefits .- 0.2
Other interest payable 1.1 0.6
37.1 36.8
Exceptional finance costs
Interest on Rank refunds .- (0.2)
Buyback of securitised debt and associated costs .- 27.2
.- 27.0
Total finance costs 37.1 63.8
Finance income
Deposit and other interest receivable (0.2) (0.1)
Total finance income (0.2) (0.1)
Movement in fair value of interest rate swaps
Gain on movement in fair value of interest rate swaps .- (3.4)
Loss on movement in fair value of interest rate swaps 8.6 4.4
8.6 1.0
Net finance costs 45.5 64.7
5 TAXATION
The underlying taxation charge for the 26 weeks ended 4 April 2015 has been
calculated by applying an estimate of the underlying effective tax rate for
the 52 weeks ending 3 October 2015 of approximately 19.6% (26 weeks ended 5
April 2014: approximately 20.0%).
4 April 2015 5 April 2014
£m £m
Current tax 3.9 (2.1)
Deferred tax (7.6) (5.2)
(3.7) (7.3)
The taxation credit includes a current tax credit of £1.5 million (2014: £6.3
million) and a deferred tax credit of £8.0 million (2014: £6.8 million)
relating to the tax on non-underlying items (note 3).
6 EARNINGS PER ORDINARY SHARE
Basic earnings per share are calculated by dividing the profit/(loss)
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period, excluding treasury shares and those held on
trust for employee share schemes.
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. These represent share options granted to employees where the exercise
price is less than the weighted average market price of the Company's shares
during the period.
Underlying earnings per share figures are presented to exclude the effect of
exceptional and other adjusting items. The Directors consider that the
supplementary figures are a useful indicator of performance.
4 April 2015 5 April 2014
Earnings Per share amount Earnings Per share amount
£m p £m p
Basic loss per share (23.8) (4.2) (47.5) (8.3)
Diluted loss per share* (23.8) (4.2) (47.5) (8.3)
Underlying earnings per share figures
Basic underlying earnings per share 23.8 4.2 23.2 4.1
Diluted underlying earnings per share 23.8 4.1 23.2 4.0
* The diluted loss per share is the same as the basic loss per share as the
inclusion of the dilutive potential ordinary shares would reduce the loss per
share and as such is not dilutive in accordance with IAS 33 'Earnings per
Share'.
4 April 2015 5 April 2014
m m
Basic weighted average number of shares 572.0 570.7
Dilutive options 6.4 6.1
Diluted weighted average number of shares 578.4 576.8
7 PROPERTY, PLANT AND EQUIPMENT
£m
Net book amount at 5 October 2014 1,990.0
Additions 71.4
Net transfers to assets held for sale and disposals (18.9)
Depreciation, revaluation and other movements 41.0
Net book amount at 4 April 2015 2,083.5
£m
Net book amount at 6 October 2013 2,063.6
Additions 72.9
Net transfers to assets held for sale and disposals (174.5)
Depreciation, revaluation and other movements (23.5)
Net book amount at 5 April 2014 1,938.5
Revaluation/impairment
At 1 February 2015 independent chartered surveyors revalued the Group's
freehold and leasehold properties on an open market value basis. These
valuations have been incorporated into the financial statements and the
resulting revaluation adjustments have been taken to the revaluation reserve
or income statement as appropriate.
During the prior period various properties were reviewed for impairment and/or
material changes in value.
The impact of the revaluations/impairments described above is as follows:
4 April 2015 5 April 2014
£m £m
Income statement:
Revaluation loss charged as an impairment (60.1) (2.9)
Reversal of past impairments 26.3 .-
(33.8) (2.9)
Revaluation reserve:
Unrealised revaluation surplus 213.0 .-
Reversal of past revaluation surplus (120.6) (2.9)
92.4 (2.9)
Net increase/(decrease) in shareholders' equity/property, plant and equipment 58.6 (5.8)
8 NET DEBT
4 April 2015 Cash flow Non-cash movements and deferred issue costs 4 October 2014
Analysis of net debt £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 189.1 8.2 .- 180.9
Bank overdrafts (7.1) 0.5 .- (7.6)
182.0 8.7 .- 173.3
Debt due within one year
Unsecured bank borrowings 0.8 .- .- 0.8
Securitised debt (25.5) 12.4 (13.1) (24.8)
Finance leases (0.1) .- .- (0.1)
Other lease related borrowings 0.1 .- .- 0.1
Other borrowings (120.0) .- .- (120.0)
(144.7) 12.4 (13.1) (144.0)
Debt due after one year
Unsecured bank borrowings (232.9) (23.0) (0.4) (209.5)
Securitised debt (847.0) .- 12.8 (859.8)
Finance leases (20.7) .- .- (20.7)
Other lease related borrowings (181.5) (47.0) 2.9 (137.4)
Preference shares (0.1) .- .- (0.1)
(1,282.2) (70.0) 15.3 (1,227.5)
Net debt (1,244.9) (48.9) 2.2 (1,198.2)
Unsecured bank borrowings due within one year represent unamortised issue
costs expected to be charged to the income statement within 12 months of the
balance sheet date. Unsecured bank borrowings due after one year represent
amounts drawn down under the Group's revolving credit facility, net of
unamortised issue costs expected to be charged to the income statement after
12 months from the balance sheet date.
Other lease related borrowings represent amounts due under sale and leaseback
arrangements that do not fall within the scope of IAS 17 'Leases'.
Other borrowings represent amounts drawn down under the securitisation's
liquidity facility. During the prior period the facility's provider, the
Royal Bank of Scotland Group plc, had its short-term credit rating downgraded
below the minimum prescribed in the facility agreement and as such the Group
exercised its entitlement to draw the full amount of the facility and hold it
in a designated bank account. The corresponding balance of £120.0 million (at
4 October 2014: £120.0 million) held in this bank account is included within
cash and cash equivalents. The amounts drawn down can only be used for the
purpose of meeting the securitisation's debt service obligations should there
ever be insufficient funds available from operations to meet such payments.
As such these amounts are considered to be restricted cash.
Included within cash at bank and in hand is an amount of £1.4 million (at 4
October 2014: £1.4 million), which relates to a letter of credit with Royal
Sun Alliance Insurance, an amount of £1.0 million (at 4 October 2014: £1.0
million), which relates to a letter of credit with Aviva, and an amount of
£8.1 million (at 4 October 2014: £8.2 million), which relates to collateral
held in the form of cash deposits. These amounts are also considered to be
restricted cash.
In addition, any other cash held in connection with the securitised business
is governed by certain restrictions under the covenants associated with the
securitisation.
4 April 2015 5 April 2014
Reconciliation of net cash flow to movement in net debt £m £m
Increase in cash and cash equivalents in the period 8.7 89.3
Cash inflow from movement in debt (57.6) (92.2)
Change in debt resulting from cash flows (48.9) (2.9)
Non-cash movements and deferred issue costs 2.2 4.4
Movement in net debt in the period (46.7) 1.5
Net debt at beginning of the period (1,198.2) (1,191.0)
Net debt at end of the period (1,244.9) (1,189.5)
4 April 2015 5 April 2014
Reconciliation of net debt before lease financing to net debt £m £m
Cash and cash equivalents 189.1 215.4
Unsecured bank borrowings (239.2) (233.3)
Securitised debt (872.5) (896.6)
Other borrowings (120.0) (120.0)
Preference shares (0.1) (0.1)
Net debt before lease financing (1,042.7) (1,034.6)
Finance leases (20.8) (20.9)
Other lease related borrowings (181.4) (134.0)
Net debt (1,244.9) (1,189.5)
9 FINANCIAL INSTRUMENTS
The only financial instruments which the Group holds at fair value are
derivative financial instruments, which are classified as at fair value
through profit or loss or derivatives used for hedging.
Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires fair value measurements to be
recognised using a fair value hierarchy that reflects the significance of the
inputs used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3 - inputs for the asset or liability that are not based on observable
market data.
The table below shows the level in the fair value hierarchy within which fair
value measurements have been categorised:
4 April 2015 4 October 2014
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Liabilities as per the balance sheet £m £m £m £m £m £m £m £m
Derivative financial instruments - 199.2 - 199.2 - 140.2 - 140.2
There were no transfers between Levels 1, 2 and 3 fair value measurements
during the current or prior period.
The Level 2 fair values of derivative financial instruments have been obtained
using a market approach and reflect the estimated amount the Group would
expect to pay on termination of the instruments. The Group obtains such
valuations from counterparties who use a variety of assumptions based on
market conditions existing at each balance sheet date.
The fair values of all non-derivative financial instruments are equal to their
book values, with the exception of borrowings. The carrying amount less
impairment provision of trade receivables, other receivables and trade loans,
and the carrying amount of trade payables and other payables, are assumed to
approximate their fair values. The carrying amount (excluding unamortised
issue costs) and the fair value of the Group's borrowings are as follows:
Carrying amount Fair value
4 April 2015 4 October 2014 4 April 2015 4 October 2014
£m £m £m £m
Unsecured bank borrowings 242.1 219.6 242.1 219.6
Securitised debt 879.2 891.6 922.0 923.7
Finance leases 20.8 20.8 20.8 20.8
Other lease related borrowings 195.1 148.1 195.1 148.1
Other borrowings 120.0 120.0 120.0 120.0
Preference shares 0.1 0.1 0.1 0.1
1,457.3 1,400.2 1,500.1 1,432.3
10 MATERIAL TRANSACTIONS
Additional contributions of £6.6 million (26 weeks ended 5 April 2014: £6.3
million) were made in the period to the Marston's PLC Pension and Life
Assurance Scheme.
There were no significant related party transactions during the period (26
weeks ended 5 April 2014: none).
11 CAPITAL COMMITMENTS
Capital expenditure authorised and committed at the period end but not
provided for in this interim financial information was £10.4 million
(at 4 October 2014: £9.0 million).
12 CONTINGENT LIABILITIES
There have been no material changes to contingent liabilities since 4 October
2014.
13 SEASONALITY OF INTERIM OPERATIONS
The Group's financial results and cash flows have, historically, been subject
to seasonal trends between the first and second half of the financial year.
Traditionally, the second half of the financial year sees higher revenue and
profitability, as a result of better weather conditions.
There is no assurance that this trend will continue in the future.
14 EVENTS AFTER THE BALANCE SHEET DATE
An interim dividend of £14.3 million, being 2.5p (2014: 2.4p) per ordinary
share, has been proposed and will be paid on 7 July 2015 to those shareholders
on the register at the close of business on 29 May 2015. This interim
financial information does not reflect this dividend payable.
On 17 April 2015, the Group acquired the trading operations of Daniel Thwaites
PLC's beer division, including the two leading beer brands Wainwright and
Lancaster Bomber. The initial cash consideration paid (excluding working
capital) was £25.1 million. Due to the proximity of this acquisition to the
date the interim results were authorised for issue the initial accounting has
not yet been completed. Full disclosures in respect of this acquisition will
be provided in the financial statements for the 52 weeks ending 3 October
2015.
15 PRINCIPAL RISKS AND UNCERTAINTIES
The Group set out on pages 14 and 15 of its 2014 Annual Report and Accounts
the principal risks and uncertainties that could impact its performance.
These remain unchanged since the Annual Report and Accounts were published and
are expected to remain unchanged for the second half of the financial year.
These risks and uncertainties are summarised as follows:
· Economic uncertainty
· Changes in regulation impacting on the cost of business or obstructing
growth
· Investment plans not meeting expectations
· Network outage or denial of service
· Loss, theft or corruption of data
· Failure to attract or retain the best people
· Incorrect reporting of financial results
· Unauthorised transactions
· Breach of financial covenants with lenders
16 INTERIM RESULTS
The interim results were approved by the Board on 14 May 2015.
17 COPIES
Copies of these results are available on the Marston's PLC website
(www.marstons.co.uk) and on request from The Company Secretary, Marston's PLC,
Coniston House, Chapel Ash, Wolverhampton, WV3 0BF.
This information is provided by RNS
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