REG - Marston's Plc - Preliminary Results <Origin Href="QuoteRef">MARS.L</Origin> - Part 2

Marston'sAnnouncement

27/11/2014 07:10

- Part 2: For the preceding part double click  ID:nRSa1191Ya 

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 has now repaid the
refunds of £5.9 million plus interest of £0.3 million thereon.  In the prior
period 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 current period. 
 
Buyback of securitised debt and associated costs 
 
During the current 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 are no longer expected to occur the cumulative hedging loss of
£24.7 million has been recognised in the income statement. 
 
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 £8.2 million (2013: gain of £3.5 million) is shown as an exceptional item. 
 
Impact of taxation 
 
The current tax credit relating to the above non-underlying items amounts to
£13.0 million (2013: £1.8 million).  The deferred tax credit relating to the
above non-underlying items amounts to £11.8 million (2013: £2.3 million).  In
addition, there is a non-underlying deferred tax credit of £nil (2013: £3.1
million) in relation to the change in corporation tax rate. 
 
Prior period non-underlying items 
 
As part of a review of its fixed asset register the Group identified various
items of cellar equipment which it assessed were no longer in use by the
business and which would not have been utilised in the prior period.  These
assets were subsequently written off with the charge and depreciation for the
period shown as an exceptional item. 
 
4    Taxation 
 
                                                              2014    2013 (Restated)  
 Income statement                                             £m      £m               
 Current tax                                                                           
 Current period                                               14.4    13.1             
 Credit in respect of tax on non-underlying items             (13.0)  (1.8)            
 Adjustments in respect of prior periods                      (0.9)   (0.5)            
                                                              0.5     10.8             
 Deferred tax                                                                          
 Current period                                               2.8     5.3              
 Adjustments in respect of prior periods                      .-      (0.1)            
 Credit in respect of tax on non-underlying items             (11.8)  (2.3)            
 Non-underlying credit in relation to the change in tax rate  .-      (3.1)            
                                                              (9.0)   (0.2)            
 Taxation (credit)/charge reported in the income statement    (8.5)   10.6             
 
 
5    Ordinary dividends on equity shares 
 
                                                           2014  2013  
 Paid in the period                                        £m    £m    
 Final dividend for 2013 of 4.1p per share (2012: 3.9p)    23.4  22.2  
 Interim dividend for 2014 of 2.4p per share (2013: 2.3p)  13.7  13.1  
                                                           37.1  35.3  
 
 
A final dividend for 2014 of 4.3p per share amounting to £24.6 million has
been proposed for approval at the Annual General Meeting, but has not been
reflected in the financial statements. 
 
Subject to approval at the Annual General Meeting, this dividend will be paid
on 2 February 2015 to those shareholders on the register at close of business
on 19 December 2014. 
 
6              Earnings per ordinary share 
 
Basic earnings per share are calculated by dividing the (loss)/profit
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period, excluding treasury shares and those held in
the Executive Share Option Plan and the Long Term Incentive Plan. 
 
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. 
 
                                            2014      2013(Restated)     
                                            Earnings  Per share  amount  Earnings  Per share  amount  
                                            £m        p                  £m        p                  
 Basic (loss)/earnings per share            (50.7)    (8.9)              56.9      10.0               
 Diluted (loss)/earnings per share*         (50.7)    (8.9)              56.9      9.9                
                                                                                                      
 Underlying earnings per share figures                                                                
 Basic underlying earnings per share        66.7      11.7               68.3      12.0               
 Diluted underlying earnings per share      66.7      11.6               68.3      11.9               
 
 
* The 2014 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'. 
 
                                            2014   2013   
                                            m      m      
 Basic weighted average number of shares    571.0  569.4  
 Dilutive options                           5.0    5.1    
 Diluted weighted average number of shares  576.0  574.5  
 
 
7              Net debt 
 
                                   2014       Cash flow  Non-cash  movements  and deferred  issue costs  2013       
 Analysis of net debt              £m         £m         £m                                              £m         
 Cash and cash equivalents                                                                                          
 Cash at bank and in hand          173.3      79.2       .-                                              94.1       
                                   173.3      79.2       .-                                              94.1       
 Debt due within one year                                                                                           
 Unsecured bank borrowings         0.8        .-         .-                                              0.8        
 Securitised debt                  (24.8)     24.0       (25.4)                                          (23.4)     
 Finance leases                    (0.1)      0.1        (0.1)                                           (0.1)      
 Other lease related borrowings    0.1        .-         0.1                                             .-         
 Other borrowings                  (120.0)    (120.0)    .-                                              .-         
                                   (144.0)    (95.9)     (25.4)                                          (22.7)     
 Debt due after one year                                                                                            
 Unsecured bank borrowings         (209.5)    (21.0)     1.1                                             (189.6)    
 Securitised debt                  (859.8)    80.0       24.4                                            (964.2)    
 Finance leases                    (20.7)     .-         0.1                                             (20.8)     
 Other lease related borrowings    (137.4)    (53.5)     3.8                                             (87.7)     
 Preference shares                 (0.1)      .-         .-                                              (0.1)      
                                   (1,227.5)  5.5        29.4                                            (1,262.4)  
 Net debt                          (1,198.2)  (11.2)     4.0                                             (1,191.0)  
 
 
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 current 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
(2013: £nil) 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 (2013:
£2.6 million) relating to a letter of credit with Royal Sun Alliance
Insurance, an amount of £1.0 million (2013: £0.5 million) relating to a letter
of credit with Aviva, and an amount of £8.2 million (2013: £8.5 million)
relating 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. 
 
Net debt does not include other financial liabilities such as trade and other
payables. 
 
                                                          2014       2013       
 Reconciliation of net cash flow to movement in net debt  £m         £m         
 Increase in cash and cash equivalents in the period      79.2       33.3       
 Cash inflow from movement in debt                        (90.4)     (87.6)     
 Change in debt resulting from cash flows                 (11.2)     (54.3)     
 Non-cash movements and deferred issue costs              4.0        (15.6)     
 Movement in net debt in the period                       (7.2)      (69.9)     
 Net debt at beginning of the period                      (1,191.0)  (1,121.1)  
 Net debt at end of the period                            (1,198.2)  (1,191.0)  
 
 
                                                                2014       2013       
 Reconciliation of net debt before lease financing to net debt  £m         £m         
 Cash and cash equivalents                                      173.3      94.1       
 Unsecured bank borrowings                                      (208.7)    (188.8)    
 Securitised debt                                               (884.6)    (987.6)    
 Other borrowings                                               (120.0)    .-         
 Preference shares                                              (0.1)      (0.1)      
 Net debt before lease financing                                (1,040.1)  (1,082.4)  
 Finance leases                                                 (20.8)     (20.9)     
 Other lease related borrowings                                 (137.3)    (87.7)     
 Net debt                                                       (1,198.2)  (1,191.0)  
 
 
8              CHANGE IN ACCOUNTING POLICY 
 
Adoption of IAS 19 'Employee Benefits' (revised 2011) 
 
The Group has retrospectively adopted IAS 19 'Employee Benefits' (revised
2011) in the current period.  The revised standard requires the Group to
recognise a single net interest component in respect of its defined benefit
pension plan, calculated by applying the discount rate to the net defined
benefit asset/liability.  In addition to this, the interest on the service
cost is now required to be included as part of the service cost itself rather
than forming part of the interest cost. 
 
The impact of the retrospective application of this new standard on the Group
income statement, Group statement of comprehensive income, Group cash flow
statement and earnings per share for the 53 weeks ended 5 October 2013 is set
out below.  There was no impact on the Group balance sheet. 
 
                                                            As originally  stated  Adjustment  Restated  amount  
 Impact on the Group income statement                       £m                     £m          £m                
 Revenue                                                    782.9                  .-          782.9             
 Operating expenses                                         (636.2)                (0.1)       (636.3)           
 Operating profit                                           146.7                  (0.1)       146.6             
 Finance costs                                              (82.8)                 (1.5)       (84.3)            
 Finance income                                             2.4                    (0.7)       1.7               
 Movement in fair value of interest rate swaps              3.5                    .-          3.5               
 Net finance costs                                          (76.9)                 (2.2)       (79.1)            
 Profit before taxation                                     69.8                   (2.3)       67.5              
 Taxation                                                   (11.2)                 0.6         (10.6)            
 Profit for the period attributable to equity shareholders  58.6                   (1.7)       56.9              
 
 
                                                                                              As originally  stated  Adjustment  Restated  amount  
 Impact on the Group statement of comprehensive income                                        £m                     £m          £m                
 Profit for the period                                                                        58.6                   (1.7)       56.9              
 Items of other comprehensive income that may subsequently be reclassified to profit or loss                                                       
 Gains arising on cash flow hedges                                                            24.9                   .-          24.9              
 Transfers to the income statement on cash flow hedges                                        24.7                   .-          24.7              
 Tax on items that may subsequently be reclassified to profit or loss                         (15.0)                 .-          (15.0)            
                                                                                              34.6                   .-          34.6              
 Items of other comprehensive income that will not be reclassified to profit or loss                                                               
 Remeasurement of retirement benefits                                                         3.6                    2.3         5.9               
 Unrealised surplus on revaluation of properties                                              2.1                    .-          2.1               
 Tax on items that will not be reclassified to profit or loss                                 14.7                   (0.6)       14.1              
                                                                                              20.4                   1.7         22.1              
 Other comprehensive income for the period                                                    55.0                   1.7         56.7              
 Total comprehensive income for the period                                                    113.6                  .-          113.6             
 
 
                                                                                    As originally  stated  Adjustment  Restated  amount  
 Impact on the Group cash flow statement                                            £m                     £m          £m                
 Operating activities                                                                                                                    
 Underlying operating profit                                                        168.3                  (0.1)       168.2             
 Depreciation and amortisation                                                      35.8                   .-          35.8              
 Underlying EBITDA                                                                  204.1                  (0.1)       204.0             
 Non-underlying operating items                                                     (20.3)                 .-          (20.3)            
 EBITDA                                                                             183.8                  (0.1)       183.7             
 Working capital movement