REG - Rank Group PLC - Final Results <Origin Href="QuoteRef">RNK.L</Origin> - Part 3

RankAnnouncement

29/10/2014 12:46

- Part 3: For the preceding part double click  ID:nRSN0905Pb 

                                       Property                                                     
                                                lease       Disposal    Restructuring  Indirect tax          
                                                provisions  provisions  provisions     provisions    Total   
                                                £m          £m          £m             £m            £m      
 At 1 July 2013                                 49.5        5.9         0.7            12.2          68.3    
 Exchange adjustments                           -           (0.3)       (0.1)          -             (0.4)   
 Unwinding of discount                          1.1         0.1         -              -             1.2     
 Charge to the income statement - exceptional   8.4         -           0.6            26.4          35.4    
 Release to the income statement - exceptional  (1.8)       -           -              (0.3)         (2.1)   
 Utilised in year                               (4.4)       (1.1)       (0.3)          (37.1)        (42.9)  
 At 30 June 2014                                52.8        4.6         0.9            1.2           59.5    
 Current                                        7.3         1.1         0.9            1.2           10.5    
 Non-current                                    45.5        3.5         -              -             49.0    
 Total                                          52.8        4.6         0.9            1.2           59.5    
 
 
Further details of the exceptional charge and release to the income statement
are provided in note 3. 
 
10.   Borrowings to net debt reconciliation 
 
Under IFRS, accrued interest and unamortised facility fees are classified as
loans and borrowings. A reconciliation of loans and borrowings disclosed in
the balance sheet to the Group's net debt position is provided below: 
 
                                    As at30 June2014  As at30 June2013  
                                                      (restated)        
                                    £m                £m                
 Total loans and borrowings         (183.9)           (168.5)           
 Less: accrued interest             1.1               1.3               
 Less: unamortised facility fees    (1.3)             (1.9)             
                                    (184.1)           (169.1)           
 Add: cash and short-term deposits  47.1              65.0              
 Net debt                           (137.0)           (104.1)           
 
 
11.   Cash generated from operations 
 
                                                  Year ended 30 June  Year ended30 June  
                                                  2014                2013               
                                                  £m                  £m                 
 Continuing operations                                                                   
 Operating profit                                 25.9                52.2               
 Exceptional items                                46.5                17.7               
 Operating profit before exceptional items        72.4                69.9               
 Depreciation and amortisation                    43.6                38.9               
 Share based payments and other                   (0.5)               (1.0)              
 Decrease in inventories                          0.2                 0.1                
 (Increase) decrease in other receivables         (1.1)               1.9                
 (Decrease) increase in trade and other payables  (7.4)               7.9                
                                                  107.2               117.7              
 Cash utilisation of provisions                   (36.5)              (5.6)              
 Cash payments in respect of exceptional items    (9.1)               (8.4)              
 Cash generated from continuing operations        61.6                103.7              
 
 
12.   Acquisition of subsidiary 
 
On 12 May 2013, the Group acquired a 100% interest in Gala Casino 1 Limited
(now Grosvenor Casinos (GC) Limited) for a base cash consideration, subject to
completion adjustments, of £179.0m.  The acquisition included 19 operating
casinos and three non-operating casino licences. 
 
Fair values 
 
In accordance with IFRS 3 'Business Combinations', the prior year comparatives
for the Group balance sheet and Group cash flow statement have been restated
for the adjustments to the provisional amounts recognised on the acquisition
of Gala Casino 1 Limited (now Grosvenor Casinos (GC) Limited).  There is no
impact on the income statement reported in the prior year period.  The amounts
disclosed in the prior year were provisional due to the proximity of the
acquisition to the Group's year-end and the completion account process
outlined by the sale and purchase agreement extending beyond the finalisation
of the prior year financial statements. 
 
The final fair values of the assets and liabilities acquired in respect of the
acquisition, along with the provisional fair values disclosed in the prior
year, are outlined in the following table. 
 
                                Provisional  Adjustments  Final   
                                £m           £m           £m      
 Intangible assets              159.5        (5.7)        153.8   
 Property, plant and equipment  18.8         (0.9)        17.9    
 Inventories                    0.2          -            0.2     
 Other receivables              1.8          (0.1)        1.7     
 Income tax receivable          2.7          (2.7)        -       
 Cash and short-term deposits   4.5          (0.3)        4.2     
 Trade and other payables       (58.4)       (0.2)        (58.6)  
 Deferred tax liability         (19.8)       6.1          (13.7)  
 Provisions                     (4.9)        -            (4.9)   
 Net assets acquired            104.4        (3.8)        100.6   
 Goodwill                       78.5         2.4          80.9    
 Consideration                  182.9        (1.4)        181.5   
 
 
Reconciliation to cash inflow (outflow) from acquisition of subsidiary
including deferred consideration 
 
                                                                         Year ended  Year ended  
                                                                         30 June     30 June     
                                                                         2014        2013        
                                                                                     (restated)  
                                                                         £m          £m          
 Consideration                                                           -           (181.5)     
 Cash and short-term deposits acquired                                   -           4.2         
 Refund of consideration arising on finalisation of completion accounts  1.2         (1.2)       
 Deferred consideration paid in respect of prior year acquisitions       (0.1)       (0.1)       
 Acquisition of subsidiary including deferred consideration              1.1         (178.6)     
 
 
Goodwill 
 
Goodwill comprised deferred tax liabilities recognised on certain fair value
adjustments arising on acquisition and the synergy benefits arising from the
exclusion of all central management functions previously associated with the
operation of the casinos from the acquisition.  The Group operates the
acquired casinos with only a small incremental cost increase in its existing
casino central management functions.  None of the goodwill recognised is
deductible for tax purposes. 
 
13.   Contingent liabilities 
 
Fiscal neutrality case 
 
In previous periods the Group disclosed a contingent liability in respect of a
claim for repayment of output VAT on amusement machines.  In May 2010, the
Group received £30.7m (VAT of £26.4m plus interest of £4.3m) in respect of the
claim, which has been the subject of ongoing litigation.  During the period,
the Court of Appeal found in favour of HMRC and consequently an amount of
£26.4m was provided to cover the expected outflow, together with an accrual
for interest of £4.3m.  In May 2014, a payment was made to HMRC in respect of
these claims, with the remaining balance being the directors' best estimate of
the outflow likely to arise.  The Group has been granted leave to appeal to
the Supreme Court, and it therefore remains possible the Group will not
ultimately be liable for these amounts.  The appeal will be held in April
2015. 
 
Other VAT and duty 
 
In previous periods the Group has disclosed contingent liabilities in respect
of a limited number of VAT and duty issues.   At 30 June 2013 the Group
estimated its total exposure in relation to be approximately £29m (plus
interest), of which £12.2m (plus interest) was provided.  During the year the
Group has paid £11.9m (plus interest of £0.8m) as settlement of these VAT and
duty issues. 
 
Property leases 
 
Concurrent to the £211m sale and leaseback in 2006, the Group transferred the
rights and obligations but not the legal titles of 44 property leases to a
third party.  The Group remains potentially liable in the event of default by
the third party.  Should default occur then the Group would have recourse to
two guarantors.  It is understood that, of the original 44 leases transferred,
16 of these have not expired or been surrendered.  These 16 leases have
durations of between one month and 99 years and a current annual rental
obligation (net of sub-let income) of approximately £1.5m. 
 
During the year, the Group became aware of certain information in respect of a
deterioration in the financial position of the third party and one of the
guarantors.  However, the Group has not to date been notified of any default,
or intention to default, in respect of the transferred leases. 
 
14.   Related party transactions and ultimate parent undertaking 
 
On 7 June 2011, Guoco Group Limited (Guoco), a company incorporated in
Bermuda, and listed on the Hong Kong stock exchange acquired a controlling
interest in The Rank Group Plc.  The ultimate parent undertaking of Guoco is
Hong Leong Company (Malaysia) Berhad (Hong Leong) which is incorporated in
Malaysia.  At 30 June 2014, entities controlled by Hong Leong owned 68.9% of
the Company's shares, including 51.8% through Guoco and its wholly owned
subsidiary Rank Assets Limited, the Company's immediate parent undertaking. 
 
During the period, The Gaming Group Limited, a wholly owned subsidiary within
the Group, purchased three non-operating casino licences from Clermont Leisure
(UK) Limited for consideration of £5.8m, and has subsequently begun operating
one of these licences.  An agreement is in place, subject to the satisfaction
of certain legal conditions, to purchase a further non-operating casino
licence for a maximum total consideration of £0.2m.  Clermont Leisure (UK)
Limited is an entity subject to common control.  The total consideration of
£6.0m includes an option to purchase one further licence for a nominal amount.
 The valuation of the casino licences was carried out by a third party on an
arms length basis. 
 
This information is provided by RNS
The company news service from the London Stock Exchange