RNS Number:4763E
London Town PLC
26 September 2007
26 September 2007
London Town plc
("London Town" or "the Group")
Interim Results for the six months ended 30 June 2007
Business review
Principal activities
The principal activities of the Group are the investment in pubs under lease and
tenancy agreements with lessees and tenants and the development of selected
sites with a view to subsequent disposal. The Group's agreements with tenants,
which comprise both tied and free of tie arrangements, generate income from
rents, sales of beer and other drinks, and through profit share arrangements for
income from leisure machines.
At 30 June 2007 the Group owned 222 mostly freehold pubs located principally in
England. The initial 14 pubs were acquired on 31 May 2006 and a further 167 pubs
on 21 December 2006. In the six months ended 30 June 2007 the Group acquired a
further 41 pubs, 5 on 19 March 2007 and 36 on 13 April 2007.
Results for the six months ended 30 June 2007
Gross property income for the six months ended 30 June 2007 amounted to
#5,621,000 (2006: #68,000). This income comprises rents, sales of beer and other
drinks, and income from leisure machines. Net property income was #2,889,000
(2006: #40,000), an overall margin of 51% (2006: 59%).
There were no disposals of development properties during the period although a
number of alternative use planning applications were submitted. To date five
applications have received consent and the marketing of these units has begun.
The Group is also marketing a further 11 pubs assets, being units which do not
fit with the strategic objectives of the Group. The strategic development of
certain pub assets has resulted in an increase in the number of closed pubs
during the period which has had an adverse impact on net property income.
Operating profit for the period was #1,942,000 (2006: operating loss of
#14,000).
After net finance costs of #3,637,000 (2006: #32,000) the loss before tax for
the year was #1,695,000 (2006: #46,000).
Pub assets
The Group's 222 pub assets at 30 June 2007 (2006: 14 pubs) are included in the
consolidated balance sheet at a total value of #121.0 million (2006: #5.3
million), comprising investment properties of #113.6 million (2006: 5.0 million)
and development properties of #7.4 million (2006: #0.3 million). The average
book value per pub at 30 June 2007 amounted to #545,000 (2006: #380,000).
Under IFRS the investment properties of #113.6 million are carried at fair
value. These assets were valued by the Directors on 31 December 2006 on an open
market basis which recorded the pub assets at the purchase price, as the
Directors considered that this approximated the open market value of the pubs
given the relatively short amount of time elapsed since their purchase and 31
December 2006. The Directors will carry out a further valuation at 31 December
2007.
The development properties of #7.4 million, which comprise pub assets held for
development and resale, are carried at the lower of cost and net realisable
value.
Financing
The Group's pub assets are financed by a combination of bank debt, deep discount
bonds and shareholders' equity.
Bank debt at 30 June 2007 amounted to #88.4 million (2006: #3.8 million) which
represents approximately 73% (2006: 72%) of the Group's pub assets. At 30 June
2007, 50% (2006: 50%) of this debt was hedged with derivative financial
instruments.
The deep discount bonds amounted to #14.8 million at 30 June 2007. The discount
rate is 10% which is accrued in the consolidated income statement and not paid
until the bond is redeemed. The Group has the option to redeem these bonds with
discount accrued to date at any time and without penalty. On 11 April 2007 the
Group redeemed the deep discount bond issued on 31 May 2006 to a third party at
a redemption price of #1.83 million. The remaining bonds are held by the three
principal shareholders of the Group. The Group intends to redeem these bonds as
soon as practical, either from the proceeds of disposal of development
properties or through a future issue of shares.
During the six months ended 30 June 2007 the Group purchased two portfolios of
pub assets:
On 19 March 2007 the Group completed the purchase of 5 freehold pubs for a cash
consideration of #3.0 million. On 13 April 2007 the Group completed the purchase
of 36 freehold and long leasehold pubs for a cash consideration of #15.0
million. The Group also committed to the purchase of 3 additional long leasehold
pubs for a further cash consideration of #1.2 million subject to landlords
consent. The aggregate cash consideration (including transaction costs) of these
two portfolios amounted to #20.3 million. These purchases have been funded by
bank debt of #12.5 million, net of expenses and the issue of shares for cash. On
11 April 2007 a placing of 9,434,237 new ordinary shares of 25 p each at 104
pence per share raised #9.8 million before expenses. The net proceeds of #9.7
million were used to provide the balance of purchase funds for the 41 pubs as
well as the redemption of the deep discount bond issued on 31 May 2006 at a
price of #1.8 million.
The Group has benefited in its recent growth from the support of its three
principal shareholders who presently account for approximately 98% of the issued
share capital. The Group believes that these shareholders are willing to support
further growth whilst acknowledging that the Group intends to widen its
shareholder base as soon as possible.
Net assets
Net assets at 30 June 2007 amounted to #21.4 million (2006: #0.02 million).
Net assets per share at 30 June 2007 amounted to 81.1 pence (2006: 0.8 pence).
Earnings before interest, tax and depreciation ("EBITDA")
EBITDA for the six months ended 30 June 2007 amounted to #1,945,000 (2006: Loss
(#12,000)).
For further information, please contact:
Smithfield Consultants Tel. 020 7360 4900
John Kiely / George Hudson
Further information on the pubs assets
Geographic location
The regional distribution of the pub assets at 30 June 2007 was as follows:
Location Number Percentage
Scotland 2 1%
North East 6 3%
North West 81 36%
York/Humber 20 9%
East Midlands 5 2%
West Midlands 29 13%
Wales 4 2%
East of England 22 10%
South East 15 7%
South West 38 17%
Total 222 100%
Gross and net property income
The gross and net property income from pub assets for the six months ended 30
June 2007 comprises the following:
30 June 30 June
2007 2006
#'000 #'000
Gross property income:
Rent 1,846 18
Sale of beer and other drinks 3,577 50
Income from leisure machines 198 0
Total 5,621 68
Net property income:
Rent 1,846 18
Sale of beer and other drinks 1,325 22
Income from leisure machines 198 0
Other costs (480) 0
Total 2,889 40
The net margin for the year on the sale of beer and other drinks was 37 % (2006:
44%) with an overall net margin on all income sources of 51% (2006: 59%).
Management arrangements
The day to day accounting and administrative tasks involved in managing the pub
assets is carried out by County Estate Management (Pubs) Limited ("County")
under a management contract. County's services includes raising rent demands,
arranging the supply of and invoicing for beer and other drinks, debt collection
and the provision of detailed monthly management and accounting information.
County accounts to the Group on a monthly basis for net rental income, net
income arising on sales of beer and other drinks and net profit shares from
leisure machines. A deduction is made for County's management fee, being 7% of
net rental income and 10% of other net income from beer and other drinks and
from leisure machines.
Board
Mark Crowther joined the board as Chief Executive Officer on 26 March 2007.
Prior to joining London Town, Mark was On-Trade Sales Director for Carlsberg UK.
Strategic objectives
The Group's principal strategic objectives are:
* the purchase of additional pub assets to expand its existing business.
* the development of individual pub plans
* the improvement of revenues and margins across the portfolio of pub
assets generally, with particular attention to barrelage and machine income
in trade tied units
* the recruitment and retention of lessees and tenants capable of growing
the businesses. This will be assisted by the implementation of the
appropriate leases and tenancy agreements
* the identification of those pubs where alternative use of the whole or
part of the site may be appropriate or where disposal may provide optimum
value for shareholders.
Principal risks and uncertainties
Smoking ban
The Group's pubs operate principally in England where a smoking ban was
introduced in July 2007. In conjunction with County the Group has been working
with lessees and tenants to ensure that they are able both to minimise any
adverse trading impact resulting from the ban as well as take advantage of new
trading opportunities such as food sales that may arise from a smoke free
environment.
Recruitment and retention of lessees and tenants
The recruitment and retention of lessees and tenants able to grow the business
remains a principal focus of the Group's management team since this will be a
key driver for the overall improvement in the quality and profitability of the
pub assets. The market for good lessees and tenants is a competitive one and the
Group will work closely with current and prospective lessees and tenants to
ensure that Group offers the right physical and business environment for both
parties to prosper.
Interest rate risk
The Group borrows at a floating rate of interest at a margin above LIBOR and
uses derivative financial instruments principally comprising an interest rate
cap for 50% of its outstanding borrowing to limit the Group's exposure to
increasing interest rates.
Current trading and outlook
The Group has continued to trade in line with expectations and remains committed
to its strategic objectives as set out above.
Andy S Wilson
Chairman
London Town plc
Consolidated income statement for the six months ended 30 June 2007
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 June 30 June 31 December
Notes 2007 2006 2006
#'000 #'000 #'000
Gross property income 5,621 68 741
Property outgoings (2,732) (28) (334)
------- -------- -------
Net property income 2,889 40 407
Administrative expenses (947) (54) (282)
------- -------- -------
Operating profit/(loss)
before net finance costs 1,942 (14) 125
Finance income 3 118 8 267
------- -------- -------
Finance expense 3 (3,755) (40) (914)
------- -------- -------
Net finance costs (3,637) (32) (647)
------- -------- -------
Loss before tax (1,695) (46) (522)
Tax expense - - -
------- -------- -------
Loss for the period
attributable to
equity holders of the
parent company (1,695) (46) (522)
------- -------- -------
Earnings per share:
Basic 4 (8.1p) (1.6p) (16.0p)
Diluted 4 (8.1p) (1.6p) (16.0p)
London Town plc
Consolidated statement of recognised income and expense
for the six months ended 30 June 2007
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 June 30 June 31 December
Notes 2007 2006 2006
#'000 #'000 #'000
Loss for the period (1,695) (46) (522)
-------- ------- -------
Total recognised income and
expense attributable to equity
holders of the parent -------- ------- -------
company (1,695) (46) (522)
-------- ------- -------
London Town plc
Consolidated balance sheet at 30 June 2007
Consolidated balance sheet Unaudited Unaudited Audited
30 June 30 June 31 December
Notes 2007 2006 2006
Assets #'000 #'000 #'000
Non-current assets
Property, plant and equipment 12 8 6
Investment property 5 113,550 5,028 94,554
Derivative financial instruments 264 - 167
------- -------- -------
113,826 5,036 94,727
Current assets
Inventories 6 7,409 299 7,240
Trade and other receivables 1,366 44 2,761
Cash and cash equivalents 3,280 268 2,682
------- -------- -------
12,055 611 12,683
Total assets 125,881 5,647 107,410
------- -------- -------
Liabilities
Current liabilities
Trade and other payables 2,190 175 2,416
------- -------- -------
Non-current liabilities
Derivative financial instruments - - 5
Financial liabilities 7 102,278 5,450 91,687
------- -------- -------
102,278 5,450 91,692
------- -------- -------
Total liabilities 104,468 5,625 94,108
------- -------- -------
Net assets 21,413 22 13,302
------- -------- -------
Capital and reserves
Called up share capital 1,319 144 841
Share premium account 22,387 - 13,059
Retained earnings (2,293) (122) (598)
------- -------- -------
Total equity attributable to equity
holders of the parent company 21,413 22 13,302
------- -------- -------
London Town plc
Consolidated cash flow for the six months ended 30 June 2007
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 June 30 June 31 December
Notes 2007 2006 2006
Cashflow #'000 #'000 #'000
statement
Operating activities
Loss before tax (1,695) (46) (522)
Depreciation 3 3 5
Finance Income (118) (8) (267)
Finance Expense 3,755 40 914
Increase in inventories (169) (299) (7,240)
(Increase)/decrease in trade and
other receivables 1,395 1 (2,716)
Increase/(decrease) in trade and
other payables (226) (267) 1,974
------- -------- -------
Cash inflow/(outflow)
from operating activities 2,945 (576) (7,852)
Investing activities
Purchase of investment
properties (18,996) (5,028) (94,554)
Purchase of property, plant
and equipment (9) - -
------- -------- -------
Cash outflow from investing
activities (19,005) (5,028) (94.554)
Financing activities
Issue of ordinary shares 9,937 - 14,503
Share issue expense paid (130) - (747)
Proceeds from bank borrowings 11,802 3,794 76,618
Proceeds from issue of deep
discount bonds - 1,685 15,715
Repayment of deep discount
bonds (1,831) - -
Purchase of interest rate
hedge (47) - (188)
Finance transaction
expense paid (219) (43) (844)
Interest paid (2,917) (26) (690)
Interest received 63 8 267
------- -------- -------
Cash inflow from financing
activities 16,658 5,418 104,634
------- -------- -------
Increase in cash and cash
equivalents 598 (186) 2,228
Cash and cash equivalents at
beginning of period 2,682 454 454
------- -------- -------
Cash and cash equivalents at
end of period 3,280 268 2,682
------- -------- -------
London Town plc
Notes to the financial statements for the six months ended 30 June 2007
1 Accounting policies
Basis of preparation
These interim financial statements have been prepared using, on a consistent
basis, the accounting policies set out in the Group's Annual Report and
Financial Statements for the year ended 31 December 2006, and which are expected
to apply at 31 December 2007. The comparative figures for the period ended 30
June 2006 have been restated for the adoption of IFRS.
In the year ending 31 December 2007, the Group will be adopting IFRS 7
"Financial instruments: disclosures". The impact of the new standard will be to
expand the disclosures provided in the financial statements for the year ending
31 December 2007 regarding the Group's financial instruments.
These interim financial statements are unaudited. The figures for the year
ended 31 December 2006 have been extracted from the Annual Report and Financial
Statements for the year ended 31 December 2006, which have been reported on by
the Group's auditors and filed with the Registrar of Companies. The report of
the auditors was unqualified, did not include references to any matter to which
the auditors drew attention by way of emphasis without qualifying their report,
and did not make any statement under sections 237 (2) or (3) of the Companies
Act 1985.
The financial information in this document does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985.
2 First time adoption of International Financial Reporting Standards
The comparative figures for the six months ended 30 June 2006 have been restated
for the adoption of IFRS. There has been no effect on the net assets, profit and
cash flow previously reported for this period under UK GAAP. The only other
changes that have been made are presentational.
London Town plc
Notes to the financial statements for the six months ended 30 June 2007
(Continued)
3 Net finance income / (cost)
Unaudited Unaudited Audited
30 June 30 June Year to
2007 2006 31 December
#'000 #'000 #'000
Finance expense
Bank loans (2,917) (20) (550)
Other interest - (6) (140)
Discount on deep discount bonds (743) (14) (142)
Finance transaction expense (95) - (56)
Loss on derivatives used to manage
fair value interest rate risk - - (26)
-------- -------- ---------
(3,755) (40) 914
Finance income
Interest receivable
Bank interest 63 - 267
Other interest - 8 -
Profit on derivatives used to manage
fair value interest rate risk 55 - -
-------- -------- ---------
118 8 267
-------- -------- ---------
Net finance costs (3,637) (32) (647)
-------- -------- ---------
4 Loss per share
The basic loss per share is calculated in accordance with International
Accounting Standard 33 on the loss for the period of #1,695,000 (December 2006 -
#522,000; June 2006 - #46,000) and 20,901,318 (December 2006 - 3,265,810; June
2006 - 2,883,750) being the weighted average number of shares in issue. Share
options in place during the period will be dilutive, though the effect is
immaterial so there is no difference between basic and diluted loss per share.
Shareholders' funds per share are 81.1 (December 2006 - 79.0; June 2006 - 0.8).
The calculation is based on the shareholders' funds at the period end of
#21,413,000 (December 2006 - #13,302,000; June 2006 - 23,000) divided by the
number of shares in issue at the period end amounting to 26,383,367 shares
(December 2006 - 16,828,938; June 2006 - 2,883,750).
London Town plc
Notes to the financial statements for the six months ended 30 June 2007
(Continued)
5 Investment property
Unaudited Unaudited Audited
30 June 30 June Year to
2007 2006 31 December
#'000 #'000 #'000
At beginning of period 94,554 - -
Additions 18,996 5,028 91,705
-------- -------- ---------
At end of period 113,550 5,028 91,705
-------- -------- ---------
The additions in the period comprise 5 pub assets purchased in March 2007 and 36
pub assets acquired in April 2007.
6 Inventories
Unaudited Unaudited Audited
30 June 30 June Year to
2007 2006 31 December
#'000 #'000 #'000
Development properties 7,409 299 7,240
-------- -------- ---------
7 Financial liabilities - non-current
Unaudited Unaudited Audited
30 June 30 June Year to
2007 2006 31 December
#'000 #'000 #'000
Secured bank loans 88,420 3,794 76,618
Deep discount bonds 14,769 1,699 15,857
Finance transaction expense (911) (43) (788)
-------- -------- ---------
102,278 5,450 91,687
-------- -------- ---------
London Town plc
Notes to the financial statements for the six months ended 30 June 2007
(Continued)
7 Financial liabilities - non-current (continued)
The bank loans are secured by a fixed charge over the Group's freehold property
and bear interest at floating rates of three month LIBOR plus 1.65%. The bank
loans are for a 5 year term ending on 26 September 2011.
The deep discount bonds are secured by a fixed and floating charge over the
assets and liabilities of the Company, subject to the priority of the secured
bank loans. The deep discount bonds are redeemable at the option of the Company
at any time subject to the priority and consent of the bank. The deep discount
bonds accrue discount at 10% per annum on a compound basis. Details of the bonds
issued and redeemed are summarised below:
Issue Redemption Subscription Redemption
Date Date Price Price
#'000 #'000
Current
20 December 2006 20 December 2011 14,030 22,597
Redeemed in period
31 May 2006 13 April 2007 1,685 1,831
8 Dividends
The directors do not propose to pay an Interim Dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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