REG - Rank Group PLC - Final Results <Origin Href="QuoteRef">RNK.L</Origin> - Part 3
17/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSQ2150Ob
24.6 18.5 4.3 3.8 0.7 51.9
Total costs on continuing operations before exceptional items 330.2 173.7 65.8 26.6 27.4 623.7
Cost of sales 391.4
Operating costs 232.3
Total costs on continuing operations before exceptional items 623.7
Year ended 30 June 2016
Grosvenor Venues Mecca Venues UKDigital Enracha Central Costs Total
£m £m £m £m £m £m
Employment and related costs 139.6 53.7 9.8 11.6 18.9 233.6
Taxes and duties 86.0 35.7 11.6 1.5 1.6 136.4
Direct costs 14.5 21.0 22.6 2.6 - 60.7
Property costs 29.4 25.6 0.6 1.7 1.1 58.4
Marketing 15.6 9.9 12.8 1.0 - 39.3
Depreciation and amortisation 25.0 12.6 4.9 1.5 1.8 45.8
Other 21.2 19.5 2.5 3.2 5.5 51.9
Total costs on continuing operations before exceptional items 331.3 178.0 64.8 23.1 28.9 626.1
Cost of sales 391.7
Operating costs 234.4
Total costs on continuing operations before exceptional items 626.1
3. Exceptional items
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Exceptional items relating to continuing operations
Venue impairment charges (6.7) (0.9)
Venue impairment reversals 2.5 1.4
Group restructuring including relocation costs (8.8) -
Net credit from property leases 14.7 1.4
Aborted acquisition costs (0.7) -
Closure of venues - (2.6)
Exceptional operating costs(1) 1.0 (0.7)
Disposal of freehold buildings - 10.0
Exceptional operating income - 10.0
Taxation (see note 5) (1.2) 0.4
Exceptional items relating to continuing operations (0.2) 9.7
Exceptional items relating to discontinued operations
Disposal of subsidiary - (0.3)
Finance costs (see note 4) - (0.3)
Taxation (see note 5) - 4.2
Exceptional items relating to discontinued operations - 3.6
Total exceptional items (0.2) 13.3
(1)It is Group policy to reverse exceptional costs in the same line as they
were originally recognised.
Continuing operations - year ended 30 June 2017
Venue impairment charges
The Group recognised impairment charges of £6.7m of which £5.2m related to two
venues within Grosvenor Casinos, £0.3m related to a venue within Mecca and
£1.2m related to a venue within Enracha. Performance at these venues has not
been in line with expectations and is not expected to significantly improve in
the future.
Venue impairment reversals
The Group reversed previous impairment charges of £2.5m, £0.7m of which
related to a venue within Grosvenor and £1.8m related to two venues within
Enracha. This reflects a significant improvement in performance following the
closure of a competitor and a sustained increase in performance attributed to
improvements in the local economic environment within Spain.
Group restructuring including relocation costs
In the first six months of 2016/17 the Group carried out a detailed review of
its entire UK organisational structure designed to improve customer service
and simplify operations. This has resulted in changes to management and team
structures at both venue and central levels, the decision to centralise
support functions in a new office in Maidenhead and the merging of the
separately run brand teams supporting digital into one operational team. The
cost of this restructure is estimated to be £9.3m with £8.8m recognised in the
current financial year and the balance expected to be incurred in the first
six months of 2017/18.
The costs incurred include £5.2m of redundancy cost, £2.2m of onerous lease
costs, £0.6m of tangible asset impairment, £0.5m of loss on disposal of
tangible assets and £0.3m of legal and professional fees.
Costs by segment were £1.8m Grosvenor Venues, £0.2m Mecca Venues, £2.0m UK
Digital and £4.8m Central Costs.
Net credit from property leases
The total net credit was £14.7m.
£11.7m was recognised in Mecca. This includes £10.7m following the successful
surrender of an onerous lease at a Mecca venue in exchange for a cash payment
of £2.0m, £1.4m due to the renegotiation of lease terms at a venue, offset by
a £0.4m charge from increasing the required provision at three venues.
£1.1m was recognised in Grosvenor. This included a £1.0m credit due to
advanced negotiation to sub-let an onerous lease, £0.3m due to a final
settlement agreed on a previously leased venue, offset by a £0.2m charge for a
venue that required a full onerous lease.
£1.9m was recognised in central costs for multi-let venues. This included a
credit of £1.5m due to the renegotiation of an onerous lease, £0.8m due to
additional sub-let income from a tenant at one of the venues, offset by a
£0.4m charge due to a reduction in variable rent expectation.
Aborted acquisition costs
Central cost includes £0.7m of aborted acquisition costs.
4. Financing
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Continuing operations:
Finance costs:
Interest on debt and borrowings(2) (2.6) (3.2)
Amortisation of issue costs on borrowings(2) (0.4) (0.4)
Interest payable on finance leases (0.6) (0.7)
Unwinding of discount in property lease provisions (0.8) (0.9)
Unwinding of discount in disposal provisions - (0.1)
Total finance costs (4.4) (5.3)
Finance income:
Interest income on short-term bank deposits(2) 0.1 0.1
Interest income on loans(2) 0.1 0.1
Total finance income 0.2 0.2
Other financial losses (0.6) (1.1)
Total net financing charge for continuing operations (4.8) (6.2)
Discontinued operations:
Exceptional finance costs - (0.3)
Total net financing charge for discontinued operations - (0.3)
Total net financing charge (4.8) (6.5)
(2) Calculated using the effective interest method.
Exceptional finance costs recognised in discontinued operations in the year
ended 30 June 2016 of £0.3m relate to the cost of a letter of credit held in
respect of taxation balances on disposed entities. There were no such costs in
the current year.
Other financial losses include foreign exchange losses on loans and
borrowings.
A reconciliation of total net financing charge for continuing operations
before exceptional items to adjusted net interest included in adjusted profit
is disclosed below:
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Total net financing charge for continuing operations before exceptional items (4.8) (6.2)
Adjust for :
Unwinding of discount in disposal provisions - 0.1
Other financial losses 0.6 1.1
Adjusted net interest payable (4.2) (5.0)
5. Taxation
Year ended 30 June 2017
Continuing operations Discontinued operations Total
£m £m £m
Current income tax
Current income tax - UK (11.8) - (11.8)
Current income tax - overseas (3.4) - (3.4)
Current income tax on exceptional items (1.8) - (1.8)
Amounts over provided in previous period 0.5 - 0.5
Total current income tax charge (16.5) - (16.5)
Deferred tax
Deferred tax - UK (1.3) - (1.3)
Deferred tax - overseas (0.3) - (0.3)
Restatement of deferred tax due to rate change 1.1 - 1.1
Deferred tax on exceptional items 0.6 - 0.6
Amounts under provided in previous period (0.4) - (0.4)
Total deferred tax charge (0.3) - (0.3)
Tax charge in the income statement (16.8) - (16.8)
Year ended 30 June 2016
Continuing operations Discontinued operations Total
£m £m £m
Current income tax
Current income tax - UK (13.6) - (13.6)
Current income tax - overseas (2.2) - (2.2)
Current income tax on exceptional items 0.1 - 0.1
Amounts under provided in previous period (0.2) - (0.2)
Amounts over provided in previous period on exceptional items 0.3 4.2 4.5
Total current income tax (charge) credit (15.6) 4.2 (11.4)
Deferred tax
Deferred tax - UK (1.1) - (1.1)
Deferred tax - overseas (0.6) - (0.6)
Restatement of deferred tax due to rate change 2.3 - 2.3
Amounts over provided in previous period 0.6 - 0.6
Total deferred tax credit 1.2 - 1.2
Tax (charge) credit in the income statement (14.4) 4.2 (10.2)
Tax on exceptional items - continuing operations
The taxation impacts of continuing exceptional items are disclosed below:
Year ended 30 June 2017 Year ended 30 June 2016
Current income tax Deferred tax Total Current income tax Deferred tax Total
£m £m £m £m £m £m
Venue impairment charges - 1.0 1.0 - 0.2 0.2
Venue impairment reversals - (0.5) (0.5) - (0.4) (0.4)
Group restructuring including relocation costs 1.5 0.1 1.6 - - -
Net credit from property leases (3.3) - (3.3) (0.4) - (0.4)
Aborted acquisition costs - - - - - -
Closure of venues - - - 0.5 0.2 0.7
Amounts over provided in respect of previous period - - - 0.3 - 0.3
Tax (charge) credit on exceptional items - continuing operations (1.8) 0.6 (1.2) 0.4 - 0.4
Tax on exceptional items - discontinued operations
The taxation impacts of discontinued exceptional items are disclosed below:
Year ended 30 June 2017 Year ended 30 June 2016
Current income tax Deferred tax Total Current income tax Deferred tax Total
£m £m £m £m £m £m
Net credit on exceptional items relating to overseas tax audits - - - 4.2 - 4.2
The £4.2m exceptional tax credit in discontinued operations in prior year
relating to overseas tax audits consists of a refund of tax paid of £4.4m
following the successful resolution of a transfer pricing dispute, offset by a
£0.2m charge in relation to a separate audit.
Tax effect of items within other comprehensive income
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Current income tax credit on exchange movements offset in reserves 0.2 0.6
Deferred tax credit on actuarial movement on retirement benefits 0.1 -
Total tax credit on items within other comprehensive income 0.3 0.6
The debit in respect of employee share schemes included within the Statement
of Changes in Equity includes a deferred tax credit of £0.1m (year ended 30
June 2016: £0.1m).
Factors affecting future taxation
UK corporation tax is calculated at 19.75% (year ended 30 June 2016: 20.00%)
of the estimated assessable profit for the period. Taxation for overseas
operations is calculated at the local prevailing rates.
On 8 July 2015, the Chancellor of the Exchequer announced the reduction in the
main rate of UK corporation tax to 19.0% for the year starting 1 April 2017
and a further 1.0% reduction to 18.0% from 1 April 2020. These changes were
substantively enacted in October 2015.
On 16 March 2016, the Chancellor of the Exchequer announced a further 1.0%
reduction to the previously announced 18.0% main rate of UK corporation tax to
17.0% from 1 April 2020. This change was substantively enacted in September
2016. The rate reductions will reduce the amount of cash tax payments to be
made by the Group.
6. Dividends paid to equity holders
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Final dividend for 2014/15 paid on 21 October 2015 - 4.00p per share - 15.6
Interim dividend for 2015/16 paid on 22 March 2016 - 1.80p per share - 7.1
Final dividend for 2015/16 paid on 20 October 2016 - 4.70p per share 18.4 -
Interim dividend for 2016/17 paid on 21 March 2017 - 2.00p per share 7.8 -
Dividends paid to equity holders 26.2 22.7
Refund of unclaimed dividends (0.2) -
A final dividend in respect of the year ended 30 June 2017 of 5.3p per share,
amounting to a total dividend of £20.7m, is to be recommended at the annual
general meeting on 19 October 2017. These financial statements do not reflect
this dividend payable.
7. Adjusted earnings per share
Adjusted earnings is calculated by adjusting profit attributable to equity
shareholders to exclude discontinued operations, exceptional items, other
financial gains or losses, unwinding of the discount in disposal provisions
and the related tax effects. Adjusted earnings is one of the business
performance measures used internally by management to manage the operations of
the business. Management believes that the adjusted earnings measure assists
in providing a view of the underlying performance of the business.
Adjusted net earnings attributable to equity shareholders is derived as
follows:
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Profit attributable to equity shareholders 62.9 74.7
Adjust for:
Discontinued operations (net of taxation) - (3.6)
Exceptional items after tax on continuing operations 0.2 (9.7)
Other financial losses 0.6 1.1
Unwinding of discount in disposal provisions - 0.1
Taxation on adjusted items and impact of reduction in tax rate (1.2) (2.6)
Adjusted net earnings attributable to equity shareholders (£m) 62.5 60.0
Adjusted earnings per share (p) - basic 16.0p 15.4p
Adjusted earnings per share (p) - diluted 15.9p 15.4p
8. Provisions
Property
lease Disposal Restructuring Indirect tax
provisions provisions provisions provision Total
£m £m £m £m £m
At 1 July 2016 44.5 4.4 - 1.2 50.1
Unwinding of discount 0.8 - - - 0.8
Charge to the income statement - exceptional 1.2 - 4.0 - 5.2
Release to the income statement - exceptional (14.6) - - - (14.6)
Utilised in year (7.3) (0.2) (0.3) - (7.8)
At 30 June 2017 24.6 4.2 3.7 1.2 33.7
Current 4.9 0.3 3.6 1.2 10.0
Non-current 19.7 3.9 0.1 - 23.7
Total 24.6 4.2 3.7 1.2 33.7
Further details of the exceptional charge and release to the income statement
are provided in note 3.
9. 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 June2017 As at30 June2016
£m £m
Total loans and borrowings (91.6) (102.2)
Less: Accrued interest 0.4 0.5
Add: Unamortised facility fees (0.2) (0.5)
(91.4) (102.2)
Less: Cash and short-term deposits 79.0 61.0
Net debt (12.4) (41.2)
10. Cash generated from operations
Year ended Year ended
30 June 30 June
2017 2016
£m £m
Continuing operations
Operating profit 84.5 91.7
Exceptional items (1.0) (9.3)
Operating profit before exceptional items 83.5 82.4
Depreciation and amortisation 45.3 45.8
Share-based payments (0.7) 1.9
Loss on disposal of property, plant and equipment 0.9 0.5
Impairment of property, plant and equipment 0.5 0.5
Decrease (increase) in inventories 0.1 (0.1)
Decrease (increase) in other receivables 11.0 (5.9)
Decrease in trade and other payables (12.2) (8.7)
128.4 116.4
Cash utilisation of provisions (7.8) (6.2)
Cash payments in respect of exceptional items (4.3) -
Cash generated from continuing operations 116.3 110.2
11. Contingent liabilities
Property leases
Concurrent to the £211.0m 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,
eight of these have not expired or been surrendered. These eight leases have
durations of between 21 months and 96 years and a current annual rental
obligation (net of sub-let income) of approximately £0.8m.
During 2014, the Group became aware of certain information in respect of a
change 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.
Stamp duty
In the prior year, the Group disclosed that it had received from HMRC a
determination in respect of the amount of stamp duty payable on certain
transactions undertaken by Gala Casino 1 Limited (now Grosvenor Casinos (GC)
Limited) before its acquisition by the Group on 12 May 2013 from Gala Coral.
The Group estimated the maximum additional stamp duty that could be due, if
HMRC were successful and Gala Coral were to default on terms of the Sale and
Purchase Agreement, to be £7.2m plus interest. During the period, Gala Coral,
have made a payment on account to HMRC in respect of the determination and the
Group has assigned the right to any potential refund back to Gala Coral. As
payment has been made by Gala Coral, there is no longer a risk of default and
therefore this risk is no longer considered a contingent liability.
12. Related party transactions and ultimate parent undertaking
Guoco Group Limited (Guoco), a company incorporated in Bermuda, and listed on
the Hong Kong stock exchange has 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 2017,
entities controlled by Hong Leong owned 56.2% of the Company's shares,
including 52.0% through Guoco's wholly-owned subsidiary, Rank Assets Limited,
the Company's immediate parent undertaking.
This information is provided by RNS
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