RNS Number : 8059X
London Town PLC
30 June 2008
London Town plc
(*London Town* or *the Company*)
Results for the year ended 31 December 2007
The Board of London Town announces the results of the Company for the year ended 31 December 2007 and confirms that its Annual Report for
the year ended 31 December 2007 has been posted to shareholders and is also available on its website, along with the Company*s most recent
shareholder presentation, at www.londontownplc.co.uk.
Enquiries:
David Rydell/Christopher Hamilton/Laura Pope
Bell Pottinger Corporate & Financial 0207 861 3232
Nicholas Wells/Max Hartley
Cenkos Securities plc 0207 397 8900
Business review
Principal activities
The principal activities of London Town plc (*the Company*) and its subsidiaries (*the Group*) comprise the operation of pubs either under
lease and tenancy agreements or through the direct management of pubs. The Group's agreements with tenants in the leased estate comprise
both tied and free of tie arrangements and generate income from rents, sales of beer and other drinks, and through profit share arrangements
for income from leisure machines. The direct management of pubs generates income directly from pub customers from beer and other drink
sales as well as food sales. The Group receives all revenues generated by the pub and is responsible for costs. At 31 December 2007 the
Group operated 283 pubs of which the leased estate comprised 223 mostly freehold pubs and the managed estate comprised 60 leased and
tenanted pubs.
Overview of the year
The year ended 31 December 2007 has involved a significant number of changes for the business and the way it is managed. It has been the
first full year of trading of the 181 freehold pubs acquired in 2006. In 2007 the Group acquired a further 42, mostly freehold pubs, 5 on 19
March 2007, 36 on 13 April 2007 and 1 on 31 August 2007. On 28 December 2007 the Group acquired GRS Inns Limited (*GRS*) which operates
managed houses under leases and tenancy agreements with a number of other pub companies. Under the terms of the agreement the practical
completion date for accounting purposes was set as 31 December 2007 and accordingly no GRS income was recognised in the year.
Until the acquisition of GRS the Group operated exclusively as the operator of a leased estate with much of the routine day to day
operations being carried out under a third party management contract. This management contract provided for routine liaison with tenants as
well as the control of and accounting for rental, wet and machine income. The contract was fee based and comprised a fee of 7% of all
rental income and 10% of all other income. This outsourced management arrangement was supplemented during the course of the year by the
Group's own operations team which determined all major strategic decisions for the Group and became increasingly involved in tenant liaison
during the course of the year.
The acquisition of GRS on 28 December 2007 provided the Group with a number of opportunities:
� An additional income stream from the operation of managed houses;
� The ability to optimise pub operations between the two estates, to move leased houses, particularly closed ones, to managed houses
and to provide a career opportunity for managers to move across to the leased estate. In the first 5 months of 2008 some 17 pubs in the
leased estate have been reopened of which 5 have been reopened as GRS managed houses;
� The opportunity to bring all operations in house with direct control via the Group's own area management team. The transition from
the previously outsourced management arrangements was completed with effect from 1 April 2008 and all the Group is now in direct control of
all aspects of its day to day operations;
� Enhanced buying leverage and improved beer margins;
� A scaleable business platform for further growth at the appropriate time.
Since the acquisition of GRS in December 2007 the Group has been managed by an expanded GRS team, chaired by John Sands and headed by
Richard Gundry as Chief Executive Officer. Operations are led by Russell Cawtheray and finance by Ian Robinson. Howard Thornton as finance
director of GRS heads up all day to day aspects of the Group's administration and financial control.
Change of accounting policy
Following the changes in the nature of the business during the course of 2007 and the increasingly direct operational focus of the
management team the Directors have reviewed the classification of the Group's assets and considered it most appropriate to classify the pub
assets of the leased estate as trading assets of the business rather than as investment property and accordingly the accounting policy has
been changed to reflect that. The pub assets treated as investment property at 31 December 2006 have been reclassified and restated as land
and buildings under property plant and equipment. The resulting effect of the reclassification on the loss shown in the prior year was an
increase in the loss of �17,000.
Results for the year
The consolidated income statement for the year is set out below. These results represent the leased estate only and reflect a full year of
trading of the 181 pubs acquired in 2006 and the post acquisition results of a further 42 pubs acquired in March, April and August of 2007.
No results are included for the managed estate acquired at the end of 2007. Revenues amounted to �11.4 million (2006 - �0.7 million) and
EBITDA amounted to �3.1 million (2006 - �0.1 million). The loss for the year of �11.6 million (2006 - �0.5 million) reflects increasingly
difficult trading conditions particularly during the latter half of 2007 during which the smoking ban has been a factor. An increasing
number of closed pubs during the course of the year has been a key factor and the weakening market in pubs as well as the alternative use
residential market has led to a more difficult and protracted disposal of surplus properties, with or without planning permission. Good
progress has been made since the year end to reverse this trend and the number of closed pubs has continued to reduce either through re-openings or the disposal of surplus properties. The loss for
the year also includes a provision of �5.8 million (2006: �nil) against the carrying value of properties held for sale.
Operating profit for the year to 31 December 2007 comprises the following:
2007
2006
Leased estate Leased
estate
�'000
�'000
Revenue:
Rent 3,789
218
Sale of beer and other drinks 7,248
520
Income from leisure machines 387
3
______
______
Total revenue 11,424
741
Gross margin1
Rent 3,789
218
Sale of beer and other drinks 2,729
210
Income from leisure machines 387
3
_______
_______
Total gross margin 6,905
431
Other expenses (3,759)
(301)
EBITDA2 3,146
130
Depreciation and amortisation (388)
(22)
_______
_______
Operating profit 2,758
108
_______
_______
1 The gross margin for the year on the sale of beer and other drinks was 38% (2006 - 40%) with an overall gross margin on all income sources
of 60% (2006 - 58%).
2 Earnings before interest, tax, depreciation and amortisation and provision for loss on disposal of properties held for sale (*EBITDA*)
The management team undertook a full review of the estate in the year and identified a number of pubs both in the leased and managed estate
which are surplus to requirements. These assets are classified as non-current assets held for sale in the balance sheet at a value of �10.8
million representing the lower of cost and net realisable value. A provision of �5.8 million has been charged in the consolidated income
statement in arriving at these net realisable values. �1 million of this provision has been used since the year end. Non*current assets held
for sale also include a number of surplus land assets which have been carved out of trading pub demises. Some of which have alternative use
planning consents.
Net finance costs of �8.5 million (2006 - �0.6 million) comprises net bank interest of �6.3 million (2006 - �0.4 million) and non cash
finance charges of �2.2 million (2006 - �0.2 million). The non cash charges include �1.5 million (2006 - �0.1 million) in respect of
discount on the deep discount bonds held by the three principal shareholders of the Group.
After providing for the loss on properties held for sale and net finance costs the loss for the year amounted to �11.6 million (2006 - �0.5
million loss).
Net assets at 31 December 2007 amounted to �14.9 million (2006 - �13.3 million). Net assets per share at 31 December 2007 amounted to 50.7
pence (2006 - 79.0 pence).
Pub assets
Pub numbers:
The movements in pub numbers are as follows:
Leased Managed Held for sale Total
At 31 December 2006 181 - -
181
Acquisitions 42 60 -
102
Transfers (35) -
35 -
______ ______ ______
______
At 31 December 2007 188 60 35 283
_______ _______ _______
_______
Since the year end 9 pubs held for sale have been disposed of.
The Group's 188 leased pubs at 31 December 2007 are included in the consolidated balance sheet under land and buildings at a total �104.3
million (2006 - �94.2 million) representing an average value of �555,000 per pub (2006 - �520,000). The fair value of the managed house
operational leases is included under intangible assets at a total of �2.1 million representing an average value per lease of �35,000.
.
Geographic location:
The regional distribution of the pubs at 31 December 2007 was as follows:
Leased Managed
Location Estate Estate Total Percentage
Scotland 2 4 6
2%
North East 6 1 7
3%
North West 82 4 86
30%
York/Humber 20 5 25
9%
East Midlands 5 6 11
4%
West Midlands 29 6 35
12%
Wales 4 1 5
2%
East of England 22 22 44
16%
South East 15 8 23
8%
South West 38 2 40
14%
London 0 1 1
0%
_______ _______ _______ _______
Total 223 60 283
100%
_______ _______ _______ _______
Financing
The Group's pub assets are financed by a combination of bank debt, deep discount bonds, short term loans and shareholders' equity.
Bank debt at 31 December 2007 amounted to �89.2 million (2006 - �76.6 million) which represents approximately 76% of the Group's pub assets.
At 31 December 2007, 99% (2006 - 50%) of the interest rate risk of the debt was hedged with derivative financial instruments.
The deep discount bonds amounted to �15.5 million at 31 December 2007 (2006 - � 15.9 million). The discount rate is 10% per annum 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 13 April 2007 the Group redeemed the deep discount bond issued on 31 May 2006
to a third party at a redemption price of �1.8 million. The remaining bonds are held by the three principal shareholders of the Group.
On 21 December 2007 the Company obtained a short term unsecured loan of �2.5 million from Anne Street Partners Limited (*Anne Street*), a
company previously called Strand Associates Limited and incorporated in England and Wales. Anne Street provides the services of Ian Robinson
(Finance Director) and Graham Lello (joint Company Secretary) to the Company. The loan is repayable with interest at 10%, calculated at
quarterly rests, at the end of 360 days. There is no penalty for early repayment.
The Directors are currently at an advanced stage of renegotiating the terms and covenants on the Group*s bank loans to reflect the
acquisition of GRS Inns Limited. Further details relating to this are included in note 5 to the financial statements.
Acquisitions
During the year the Group acquired the following assets:
During the year the Group purchased a further 42 pubs, comprising 35 freehold pubs and 7 long leasehold pubs for an aggregate cash
consideration of approximately �19.6 million (including transaction costs). The purchase of 5 pubs was completed on 19 March 2007 and the
purchase of 36 from Save Investments Limited, a related party, was completed on 13 April 2007. An additional pub was purchased from Save
Investments Limited on 31 August 2007. These purchases were funded by bank debt of �11.8 million, net of expenses, and the issue of shares
for cash. On 13 April 2007 a placing of 9,434,237 new ordinary shares of 5p 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 originally issued on 31 May 2006 at a price of �1.8 million.
On 28 December 2007 the Group acquired the whole of the issued capital of GRS for a total consideration of approximately �4.31 million
including transaction costs. This comprised initial and contingent consideration elements. The initial consideration amounted to �485,000 in
cash and �325,000 in cash to repay GRS Directors' loans as well as the issue of 2,852,943 ordinary shares at 85 pence. The contingent
consideration comprises the issue of up to a further 1,264,706 ordinary shares dependent on certain performance criteria for the enlarged
Group to be satisfied by the end of June 2008. The aggregate cash payment of �810,000 was funded from the proceeds of a short term unsecured
loan of �2.5 million made available to the Company from Anne Street. The balance of the loan proceeds were used for general working capital
purposes.
If the acquisition of GRS had been completed at the beginning of the financial year GRS would have contributed an additional �19,614,000 to
Group revenues and an additional �442,000 to Group EBITDA.
Board and senior management
A number of board changes have taken place during the year. On 26 March 2007 Mark Crowther joined the board as Chief Executive Officer. He
resigned on 21 December 2007.
On 28 December 2007 the board of the Company was reorganised following the acquisition of GRS. John Sands, previously Chairman of GRS became
Non-executive Chairman of the enlarged Group. Andrew Wilson, the previous Chairman of the Company remains as a Non*executive Director.
Richard Gundry, the Managing Director of GRS joined the board as Chief Executive Officer of the enlarged Group.
John Sands has over 25 years experience within the brewing and licensed retailing industry at a senior level. He is responsible for the
creation and development of Pubmaster, which was sold to Punch Taverns in December 2003 for �1.2 billion. Under his tenure as Executive
Chairman of Pubmaster Ltd he completed Pubmaster's biggest ever purchase, with the acquisition of Inn Partnership and its estate of 1,200
pubs. Previous roles include Managing Director of Cameron Inns and Managing Director of Brent Walker Inns & Retail, where he held
responsibility for developing a strategic business unit to manage and trade in public houses. He is presently Chairman of the North East
Tourist Advisory Board, Invesco English & International Investment Trust, Wear Inns Limited and a director of the Community Foundation.
Richard Gundry has had over thirty-five years experience in the pub industry and was owner of GRS from 1995 to 2000 before its sale to
Pubmaster. In 2001 he joined Pubmaster as Group Operations Director, where he was responsible for 3400 pubs nationally. Following
Pubmaster's sale to Punch in 2004 he pursued other interests in the licensed trade before buying back GRS from Punch Taverns along with John
Sands and Howard Thornton in June 2006. His other experience in the industry includes senior positions at Grant Met (Norwich Brewery) and
Whitbread & Co.
The senior management of the Group has been strengthened with the appointment of Russell Cawtheray as Operations Director and Howard
Thornton as head of the Group's administrative and financial control operations. Russell has over 25 years experience in the pub industry
and prior to joining GRS he was the Regional Operations Director for Punch Taverns for the South East, a region covering 465 pubs and 13
area managers. Previously he was the Regional Operations Director for Pubmaster for the South East, covering 640 pubs and 16 area managers.
Howard Thornton has been finance director of GRS since 1998. He was previously finance director of Pepsi Co in South Africa.
On 12 June 2008 David Beech was appointed as Non*Executive Director in place of Andrew Jurenko who resigned on the same date. David, aged
42, was previously a corporate lawyer for 17 years and managing partner at Heatons Solicitors until 2004. For the last 4 years David has
been a private equity fund manager.
Principal risks and uncertainties
Smoking ban
The Group's pubs operate principally in England where a smoking ban was introduced in July 2007. The Group continues to work 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 continues to be 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 the 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
interest rate caps for 99% of its outstanding borrowing to limit the Group's exposure to increasing interest rates.
Current trading and outlook
The Group continues to trade in line with expectations in what remains a challenging market place.
In five months since the new management team took over the Group has benefited from:
� The reopening of 17 closed pubs
� Improved margins
� Direct marketing support from our major suppliers
� The successful transition from outsourced management to direct control over all the Group's day to day operations
� Direct and more frequent tenant liaison
� The disposal of 9 pubs which were surplus to requirements
The Group is committed to a number of capital expenditure projects at its pubs and intends to consider selective acquisitions at the
appropriate time.
Consolidated income statement for the year ended 31 December 2007
Note 2007
2006
Restated
�'000
�'000
Revenue 1 11,424
741
Cost of sales (4,519)
(310)
_______
_______
Gross profit 6,905
431
Operating expenses (10,027)
(323)
Operating (loss)/profit
(3,122) 108
Add back
Depreciation and amortisation
388 22
Provision for loss on disposal of properties held for resale
5,849 -
_______ _______
EBITDA1
3,115 130
Operating (loss)/profit (3,122)
108
Finance income 2 112
267
Finance expense 2 (8,631)
(914)
_______
_______
Loss before tax (11,641)
(539)
Tax expense -
-
_______
_______
Loss for the year attributable to the (11,641) (539)
equity holders of the parent company _______ _______
Loss per share:
Restated
Basic 3 (48.96p)
(16.53p)
Diluted 3 (48.96p)
(16.53p)
1 Earnings before interest, tax, depreciation and amortisation and provision for loss on disposal of properties held for sale (*EBITDA*)
Consolidated balance sheet at 31 December 2007
Note 2007
2006
Restated
�'000
�'000
Assets
Non-current assets
Property, plant and equipment 4 105,926 94,201
Goodwill 2,932
-
Intangible assets 2,431
333
Derivative financial assets 300
167
_______
_______
111,589
94,701
Current assets
Inventories 574
-
Trade and other receivables 1,733
2,761
Cash and cash equivalents 2,942
2,682
_______
_______
5,249
5,443
Non-current assets classified as held for sale 10,759 7,240
_______
_______
Total assets 127,597
107,384
_______
_______
Liabilities
Current liabilities
Trade and other payables 5,350
2,407
Corporation tax payable 41
-
Loans and borrowings 5 3,536
-
Provisions 87
-
_______
_______
9,014
2,407
Non-current liabilities
Derivative financial liabilities 11
5
Loans and borrowings 5 103,293
91,687
Deferred tax liabilities 373
-
_______
_______
103,677
91,692
_______
_______
Total liabilities 112,691
94,099
_______
_______
Total net assets 14,906
13,285
_______
_______
Equity
Called up share capital 1,469
841
Share premium reserve 22,505
13,059
Merger reserve 2,282
-
Shares to be issued 875
-
Retained earnings (12,225)
(615)
_______
_______
Total equity attributable to equity holders
of the parent company 14,906
13,285
_______
_______
Consolidated cash flow statement for the year ended 31 December 2007
2007
2006
Restated
�'000
�'000
Operating activities
Loss for the year (11,641)
(539)
Provision for loss on disposal of properties held for sale 5,849 -
Depreciation and amortisation 388
22
Finance income (112)
(267)
Finance expense 8,632
914
Share based payment charge 31
-
_______
_______
Cash inflow before changes in working capital 3,147 130
Decrease/(increase) in trade and other receivables 1,793 (2,716)
Increase in trade and other payables 45
1,965
_______
_______
Cash inflow/(outflow) from operating activities 4,985 (621)
Investing activities
Acquisition of subsidiary, net of cash acquired (431) -
Purchase of property, plant and equipment (19,885) (101,445)
Purchase of intangible assets: operating leases (129) (340)
_______
_______
Cash outflow from investing activities (20,445) (101,785)
Financing activities
Issue of ordinary shares 9,937
14,503
Share issue expense paid (131)
(747)
Proceeds from bank borrowings 11,779 75,774
Proceeds from short term loan 2,500
-
Proceeds from issue of deep discount bonds - 15,716
Repayment of deep discount bonds (1,831) -
Purchase of interest rate hedge (717)
(188)
Interest paid (6,380)
(691)
Interest received 110
267
_______
_______
Cash inflow from financing activities 15,267 104,634
_______
_______
(Decrease)/increase in cash and cash equivalents (193) 2,228
Cash and cash equivalents at beginning of period 2,682 454
_______
_______
Cash and cash equivalents at end of period 2,489 2,682
_______
_______
Cash and cash equivalents comprise:
Cash at bank and in hand 2,942
2,682
Bank overdrafts (453)
-
_______
_______
Cash and cash equivalents at end of period 2,489 2,682
_______
_______
Notes forming part of the preliminary results announcement for the year ended 31 December 2007
1 Segment information
The group operates in two business segments: a leased estate and a managed estate. There is only one geographic segment as all activities
are conducted in the United Kingdom.
2007
Leased Managed Unallocated Total
�'000 �'000 �'000
�'000
Revenue:
Rent 3,789 - -
3,789
Sale of beer and other drinks 7,248 - -
7,248
Income from leisure machines 387 - -
387
_______ _______ _______ _______
Total revenue 11,424 - -
11,424
Cost of sales (4,519) - -
(4,519)
_______ _______ _______ _______
Gross profit 6,905 - -
6,905
Operating expenses (8,390) - (1,637) (10,027)
Segment result
(1,485) - (1,637) (3,122)
Add back:
Depreciation and amortisation 362
- 26 388
Provision for loss on disposal of
properties held for resale 5,849
- - 5,849
_______ _______ _______ _______
EBITDA
4,726 - (1,611) 3,115
Segment result (1,485) - (1,637)
(3,122)
Finance income - - 112
112
Finance expense - - (8,631)
(8,631)
_______ _______ _______ _______
Loss before taxation (1,485) - (10,156) (11,641)
Taxation - - -
-
_______ _______ _______ _______
Loss for year (1,485) - (10,156)
(11,641)
_______ _______ _______ _______
Assets and liabilities
Total assets 116,194 5,540 6,073 127,807
Total liabilities (2,168) (3,396) (107,337) (112,901)
_______ _______ _______ _______
Net assets 114,026 2,144 (101,264) (14,906)
_______ _______ _______ _______
Other information
Capital expenditure 19,918 - -
19,918
Share based payment charge 31
31
2006 Restated
Leased Managed Unallocated Total
�'000 �'000 �'000
�'000
Revenue:
Rent 218 - -
218
Sale of beer and other drinks 520 - -
520
Income from leisure machines 3 - -
3
_______ _______ _______ _______
Total revenue 741 - -
741
Cost of sales (310) - -
(310)
_______ _______ _______ _______
Gross profit 431 - -
431
Operating expenses (77) - (246)
(323)
Segment result
354 - (246) 108
Add back:
Depreciation and amortisation 17
- 5 22
Provision for loss on disposal of
properties held for resale
- - - -
_______ _______ _______ ______
EBITDA
371 - (241) 130
Segment result 354 - (246)
108
Finance income - - 267
267
Finance expense - - (914)
(914)
_______ _______ _______ _______
Loss before taxation 354 - (893)
(539)
Taxation - - -
-
_______ _______ _______ _______
Loss for year 354 - (893)
(539)
_______ _______ _______ _______
Assets and liabilities
Total assets 102,592 - 4,792
107,384
Total liabilities (1,464) - (92,635)
(94,099)
_______ _______ _______ _______
Net assets 101,128 - (87,843)
13,285
_______ _______ _______ _______
Other information
Capital expenditure 103,306 - -
103,306
_______ _______ _______ _______
2 Finance income and expense
Finance income
2007
2006
�'000
�'000
Interest receivable on bank deposits 110
267
Interest receivable on overdue rents 2
-
_______
_______
112 267
_______
_______
Finance expense
Interest payable on bank loans 6,380 550
Amortisation of debt issue costs 203 56
Interest payable on short term loans 4 140
Discount on deep discount bonds 1,455 142
_______
_______
8,042
888
Loss on derivatives 589
26
_______
_______
8,631
914
_______
_______
The loss of �589,000 (2006 - �26,000) on derivatives used to manage fair value interest rate and cash flow risk relates to the fair value
adjustment to interest caps held by the group at a cost of �905,000 (2006 - �188,000).
3 Loss per share
The calculation of basic loss per share is based on a loss of �11,641,000 (2006 * �539,000) and weighted average number of shares
of23,772,415 (2006 * 3,265,810).
There are 625,000 shares which could be exercised under the company's unapproved share option scheme. In addition to this there are a
further 1,264,706 ordinary shares that can be allocated under the terms of the deferred consideration for the acquisition of GRS. As at 31
December 2007 the conditions for the contingent consideration had not been met. The Group reported a loss for the year and accordingly these
potential shares are deemed to be anti-dilutive. Therefore none of these shares have been included in the calculation of diluted loss per
share. As a result this is equal to the basic loss per share.
4 Property, plant and equipment
Public house
Land and fixtures and Motor Office
buildings fittings vehicles equipment Total
�'000 �'000 �'000 �'000 �'000
Cost
At 1 January 2006 - - - 148 148
Additions 101,445 - - - 101,445
Disposals - - - -
-
Transferred to non-current assets
classified as held for sale (7,240) - - - (7,240)
_______ _______ _______ _______ _______
At 1 January 2007 - restated 94,205 - - 148 94,353
Additions 19,533 217 - 35 19,785
Additions from acquisition 117 3,423 22 173 3,735
Transferred to non-current assets
classified as held for sale (9,268) - - - (9,268)
_______ _______ _______ _______ _______
At 31 December 2007 104,587 3,640 22 356 108,605
_______ _______ _______ _______ _______
Accumulated depreciation
At 1 January 2006 - - - 137 137
Charge for year 10 - - 5
15
_______ _______ _______ _______ _______
At 1 January 2007 10 - - 142 152
Additions from acquisitions - 2,158 7 85 2,250
Charge for year 251 17 - 9 277
_______ _______ _______ _______ _______
At 31 December
2007 261 2,175 7 236 2,679
_______ _______ _______ _______ _______
Net book value
At 31 December
2007 104,326 1,465 15 120 105,926
_______ _______ _______ _______ _______
At 31 December
2006 * restated 94,195 - - 6 94,201
_______ _______ _______ _______ _______
5 Loans and borrowings * current
2007
2006
�'000
�'000
Bank loan (secured) 583 -
Bank overdraft (secured) 453 -
Unsecured loan 2,500 -
_______
_______
3,536
-
_______
_______
The bank loan of �583,000 is owed by GRS Inns Limited (*GRS*) and is secured by way of a fixed charge over certain operating leases of GRS
and a floating charge over the assets and liabilities of GRS. The loan is repayable with interest at 1.95% above the bank's base rate.
The bank overdraft of �453,000 is owed by GRS and is secured by way of a fixed charge over the leasehold office building of GRS together
with personal guarantees by two of the directors of GRS.
The unsecured loan from Anne Street Partners Limited is repayable with interest at 10%, calculated at quarterly rests, at the end of 360
days. There is no penalty for early repayment.
Loans and borrowings * non-current
2007
2006
�'000
�'000
Secured bank loans 87,812 75,830
Deep discount bonds 15,481 15,857
_______
_______
103,293
91,687
_______
_______
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 secured bank loan includes the balance of unamortised debt issue costs of �805,000 (2006 - �788,000).
Following the acquisition of GRS Inns Limited the Directors are in the process of renegotiating the terms and covenants on these loans and
are currently at an advanced stage in relation to this. The new agreement is not expected to result in a change in the bank loan amount and
is expected to enable the Group to meet its loan covenant requirements at future dates and accordingly the Directors are confident that the
Group will continue to have sufficient loan facilities. Waivers for bank covenant tests were in place at 31 December 2007 in relation to
secured bank loans totalling �87,812,000 at that date. Therefore these loans have been presented in the balance sheet as falling due for
payment under their original terms rather than on demand.
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 are
summarised below:
Subscription Redemption
Issue date Redemption date price price
�'000
�'000
20 December 2006 20 December 2011 14,030 22,597
_______
_______
On 13 April 2007 the Company redeemed the deep discount bond issued on 31 May 2006. The redemption price was �1,831,191 and covered the
subscription price of �1,684,862 together with the discount accrued to date of �146,329.
6 Related party transactions
On 21 December 2006 and 16 April 2007 the Group acquired a portfolio of 167 and 36 freehold and long leasehold pubs respectively from Save
Investments Limited for an open market consideration of �96.2 million and �16.2 million including transaction costs. Save Investments
Limited is a wholly owned subsidiary of Incorporated Holdings Limited which is currently a 20% shareholder.
On 21 December 2006 and in relation to the purchase of the portfolio of 167 freehold pubs, the parent company issued deep discount bonds to
the three principal shareholders. Details of the amounts due under the deep discount bonds at the year end to the related parties are
provided in the table below.
2007
2006
�'000
�'000
Burac Invest and Trade Corp.
Subscription price 6,264 6,264
Accrued discount 647 19
_______
_______
6,911
6,283
Robar Limited
Subscription price 3,883 3,883
Accrued discount 402 12
_______
_______
4,285
3,895
Incorporated Holdings Limited
Subscription price 3,883 3,883
Accrued discount 402 12
_______
_______
4,285
3,895
_______
_______
15,481
14,073
_______
_______
On 21 December the Company obtained a short term unsecured loan of �2.5 million from Anne Street Partners Limited (*Anne Street*), a company
previously called Strand Associates Limited and incorporated in England and Wales. Anne Street provides the services of Ian Robinson
(Finance Director) and Graham Lello (joint Company Secretary) to the Company. The loan is repayable with interest at 10%, calculated at
quarterly rests, at the end of 360 days. There is no penalty for early repayment.
Under the terms of an agreement dated 1 July 2007 GRS Inns Limited, a wholly owned subsidiary of the Company provides provided accounting
and other services to Wear Inns Limited (*Wear*). John Sands, the Chairman and a shareholder of the Company is a 50% shareholder of Wear.
Annual fees received by the Company for these services are approximately �21,000. The agreement may be terminated by either party by giving
3 months written notice to the other, such notice period not to expire earlier than 31 December 2008.
Richard Gundry, a director of the Company and of GRS Inns Limited, and Howard Thornton, a director of GRS Inns Limited, have given personal
guarantees of �200,000 and �100,000 respectively in respect of a bank loan to GRS Inns Limited.
7 Acquisition
On 28 December 2007 the Group acquired the whole of the issued share capital of GRS Inns Limited (*GRS*) which operates managed houses under
leases and tenancy agreements with other pub companies.
The net assets acquired, consideration paid, and goodwill upon acquisition was as follows:
GRS's net assets at the acquisition date:
GRS Fair value Acquisition
Book values adjustment amount
�'000 �'000
�'000
Other intangible assets * operating leases - 2,080 2,080
Property, plant and equipment 1,672 (187) 1,485
Goodwill 186 (186)
-
Inventories 574 -
574
Trade and other receivables 765 - 765
Cash and cash equivalents 55 - 55
Trade and other payables (2,597) - (2,597)
Financial liabilities (583) -
(583)
Provisions (87) -
(87)
Deferred tax liability 210 (583) (373)
_______ _______ _______
Net identifiable assets and liabilities 195 1,124 1,319
_______ _______
Goodwill on acquisition 2,932
_______
Total consideration 4,251
_______
Satisfied by:
Cash consideration 485
Transaction costs payable 341
Fees paid in shares
125
Initial consideration payable in shares 2,425
Contingent consideration payable in shares 875
_______
Total consideration 4,251
_______
Cash paid
(485)
Cash acquired
54
_______
Net cash outflow
(431)
_______
If the acquisition had been completed at the beginning of the financial year GRS would have contributed an additional �19,614,000 to Group
revenues, an additional �442,000 to Group EBITDA and a loss after tax of �200,000. All intangible assets are recognised at their respective
fair values, the excess over the net assets acquired is recognised as goodwill in the financial statements. Goodwill represents the value of
the income stream derived from the managed house estate and the collective management skills and experience of the GRS management team in
managing and operating public houses.
The Directors consider the fair value of the shares issued for the acquisition to be 85 pence each. This price was below the AIM quoted
share price of 167 pence at the time of the acquisition. The reason the Directors have used a lower fair value is because the Company*s
shares are not actively and regularly traded and therefore the quoted price does not represent fair value.
In arriving at the judgement that there is not an active market in the Company*s shares the Directors considered both the frequency and
quantity of share trading transactions by shareholders in the year. During the year to 31 December 2007 the total volume of shares traded
was 48,700 shares, meaning that less than 0.2% of the Company*s 29.4 million shares in issue were traded during the year. There were several
months in which no shares were traded at all. This low volume of share transactions has continued into 2008, with only 3,300 shares being
traded in the 5 month period to 31 May 2008.
On 11 April 2007 the company issued 9.4 million shares (an increase in 55% of the then share capital) for cash at 104 pence per share. The
Directors recommended this value to the existing shareholders based on a pricing model based on the net assets per share of the Company plus
a premium.
In determining the fair value of the consideration to be 85 pence in December 2007, the Directors used a similar pricing model, taking into
account the impact of the decline in the leisure market between April 2007 and December 2007. The Directors also compared this methodology
to the share prices of actively traded listed companies in the same sector and believe this to be an appropriate method given the size and
nature of the Group*s business.
8 Post balance sheet events
On 27 March 2008 a short term unsecured loan of �2.5 million ("the Loan") was made to the Company by Burac Invest and Trade Corp ("Burac").
Burac holds 48.4% of the issued share capital of the Company on behalf of The Horizon Charitable Trust. The Loan carries interest at the
rate of 10% per annum and is repayable no later than 20 March 2009. The proceeds of the Loan will be used to provide the balance of funding
of approximately �300,000 for the acquisition of two pubs, to repay approximately �900,000 of bank borrowings of GRS Inns Limited, the
Company's wholly owned subsidiary, and the balance will be used for general working capital purposes. The total consideration for the two
pubs being acquired is �845,000 of which approximately �545,000 will be provided by bank debt.
9 Report and Accounts
The financial information set out in this announcement has been extracted from the audited consolidated financial statements of London Town
plcfor the year ended 31 December 2007, which were authorised for issue by the Board as a whole following their approval on 30 June 2008 and
which have an unqualified audit report. The information set out in this part does not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985. The Companies Act 1985 permits Directors to reverse the financial statements subsequent to issuance
if they are found to be defective.
The audited accounts of the Company for the year ended 31 December 2007 will be posted to Shareholders shortly and will be delivered to the
Registrar of Companies. Copies will be available to the public at the Company*s offices, 58 Queen Anne Street, London, W1G 8HW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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