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2009-09-28 09:34
Pubs 'n' Bars PLC - Interim Results |
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RNS Number : 7417Z Pubs 'n' Bars PLC 28 September 2009 Pubs 'n' Bars plc (AIM: PNB) ("Pubs 'n' Bars" or "the Group")
INTERIM RESULTS FOR THE PERIOD ENDED 30 JUNE 2009 Pubs 'n' Bars, the AIM quoted community pub owner and operator, announces its unaudited interim results for the period ended 30 June 2009. The first six months of the current year have been disappointing and show no improvement over the corresponding period of 2008. Part of the decline in turnover was due to a change in the mix of pubs. There were more pubs under management in 2008. Managed houses account for a larger turnover as tenanted houses only contribute rents and a small amount of beer sales income. In addition, beer sales to tenants fell from £675,000 to £301,000 due to our major supplier entering administration. We have made arrangements with new suppliers whereby we no longer purchase the beer and then sell it to our tied tenants, but receive a profit contribution from the supplier built into the price at which the tenants purchase their beer. Taking these factors into account, the decline in like for like turnover was 3.05%. Gross profit margin fell from 68.99% to 66.77%; this was also impacted by the continued decline in income from gambling machines. There can be no doubt that the smoking ban continues to adversely affect traditional community pubs like ours. Together with competition from supermarkets which, despite government pleas, continue to use alcohol sales as a loss leader, uncertain weather and no major international football matches to bring in customers, trading conditions were extremely difficult for the Group. Current Trading Trading remains difficult in the second half of the year. We are still being affected by the factors mentioned above and turnover is currently approximately 3% lower than last year. The decline in like for like sales has been less pronounced since mid August and although it is too early to call this a recovery, we are hopeful that the trading climate is improving. As previously announced on 10 September 2009, administrators have been appointed to our subsidiary Moorgate Taverns Ltd. This group of ten freeholds was trading at a loss, there were no parent company guarantees and, as a result, the Group will save approximately £150,000 per annum. We are continuing to negotiate with our bankers who are showing a great deal of understanding and the utmost co-operation in these difficult times. Finally, I would like to thank my colleagues and all members of the staff for their continued efforts on behalf of the Group. K. CHAPMAN Chairman
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2009
Administrative expenses
OTHER COMPREHENSIVE INCOME
revaluation
EARNINGS PER SHARE - from continuing and total operations
CONSOLIDATED INTERIM BALANCE SHEET
AS AT 30 JUNE 2009
ASSETS
Non-current assets
instruments
Current assets
EQUITY AND LIABILITIES
Capital and reserves
Non-current liabilities
instruments
Current liabilities
CONSOLIDATED INTERIM CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2009
Cash flows from operating activities
Adjustments for:
adjustment
Cash flows from investing activities
Cash flows from financing activities
NET DECREASE IN CASH
END OF PERIOD
REPRESENTED BY:
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2009
Transactions with owners, recorded directly in
Transactions with owners, recorded directly in
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2009
The interim financial information in this report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS), as adopted for use in the EU, applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the directors expect to be applicable as at 31 December 2009.
The financial information has been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), under the historical cost convention as modified by the revaluation of freehold, long leasehold property and derivative financial instruments. The measurement basis is the historical cost convention and the principal accounting policies are set out below.
The financial information for the year ended 31 December 2008 set out in this interim report does not comprise the Group's statutory accounts as defined in Section 240 of the Companies Act 1985. The statutory accounts for the year ended 31st December 2008, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 of the Companies Act 2006. These accounts have been prepared in accordance with IAS 34 'Interim Financial Statements'. The financial information for the six months ended 30 June 2009 and 30th June 2008 is unaudited. Going Concern The interim financial statements have been prepared on a going concern basis which the Directors believe to be appropriate. At the 30 June 2009 the Group classified £34,264,493 of long term bank as short term liabilities due to breaches of covenants in the underlying agreements. The Group is continuing to negotiate with its bankers with regard to restructuring its facilities and it is likely that this will include increased interest margins. The issues impacting the pub sector continue especially the smoking ban, the credit squeeze and the availability of discounted alcohol at supermarkets. The Directors have prepared cash flow forecasts for two years from the 31 December 2008 and have taken steps to reduce the Group's net cash outflow. These projections have been prepared on the basis that the impact of the current economic downturn has been incorporated in their forecasts. In terms of any future interest rate changes, the cash projections have been revised to reflect possible interest rate adjustments. On this basis the Board considers that the Group will have sufficient funds for the twelve month period from the date of signing of the interim financial statements. In view of the significance of the factors outlined above, the Independent Review Report includes an Emphasis of Matter which refers to the existence of these uncertainties and their impact on the Group's ability to continue in operational existence for the foreseeable future.
A review of IFRIC interpretations were mandatory for the Group's accounting period, but are not relevant to the operations of the Group. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these interim financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncements. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements. IFRS 3 Business Combinations (Revised 2008) (effective from 1 July 2009) The standard is applicable for business combinations occurring in reporting periods beginning on or after 1 July 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, but still requires use of the purchase method, and will have a significant effect on business combinations occurring in reporting periods beginning on or after 1 July 2009.
The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group's interest in subsidiaries. Management does not expect the standard to have a material effect on the Group's financial statements. Annual Improvements 2009 The IASB has issued Improvements for International Financial Reporting Standards 2009 which became effective in the six months period ending 30June 2009 however, these amendments are not expected to have a material impact on the Group's financial statements.
The financial information incorporates the results of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Financial statements of the subsidiaries are prepared to the same year end, 31 December. Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the Group.
Goodwill on acquisitions comprises the excess of the fair value of the consideration plus any associated costs for investments in subsidiary undertakings over the fair value of the net identifiable assets acquired. Adjustments are made to fair values to bring the accounting policies of acquired businesses into alignment with those of the Group. The costs of integrating and reorganising acquired businesses are charged to the income statement post acquisition. Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Negative goodwill is recognised immediately in the income statement.
Revenue is the value of goods and services sold to third parties as part of the Group's trading activities, after deducting sales based taxes, coupons and staff discounts. The majority of revenue comprises beverages as well as food sold in the Group's outlets. This revenue is recognised at the point of sale to the customer. Revenue arising from the sale of property is recognised on unconditional exchange of contracts. Investment income is recognised upon a receivable basis.
The tax expense represents the sum of the tax currently payable and any deferred tax. The tax currently payable is based on the estimated taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be
Deferred tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
The cost of share-based payment arrangements, whereby employees receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the income statement. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value at the date of grant. The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non market-based vesting conditions prevailing at the balance sheet date. Fair value is measured by the use of Black-Scholes option pricing model and is based on a reasonable expectation of the extent to which performance criteria will be met.
Plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the costs of assets, over their estimated useful lives, using the straight-line method, on the following bases:
The property assets of the Group are stated at revalued amounts, being fair value at the date of revaluation less accumulated impairment losses. Increases in the value of revalued assets are recognised in the revaluation reserve except to the extent they relate to a previous decrease in value which had been charged to the income statement. Decreases in value are taken to the revaluation reserve to the extent of any pre-existing surplus on that individual asset; decreases in excess of any pre-existing surplus are taken to the income statement. Pub Operating Lease Premiums Short leasehold property premiums arising on leases of property which are classified as operating leases under IAS17 are recognised as intangible fixed assets. They are capitalised at cost and amortised over the finite lease term, amortisation being recognised under amortisation expenses. The leases are tested annually for impairment. Any improvements to the short leasehold property are classified as leasehold improvements under tangible fixed assets.
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and if events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for indicators of impairment is performed annually. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Trade receivables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material. Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts. Interest on overdue trade receivables is recognised as it accrues.
Cash and cash equivalents comprise cash at bank and in hand and other short-term highly liquid deposits with an original maturity at acquisition of three months or less. Cash held on deposit with an original maturity at acquisition of more than three months is disclosed as current asset investments. For the purposes of the cash flow statement, cash and cash equivalents consists of cash and cash equivalents as defined above, net of bank overdrafts that are repayable on demand and that are integral to the Group's cash management.
Trade payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.
The Group's policy is to hedge a proportion of its variable rate borrowings at fixed rates of interest. To achieve this, the Group enters into interest rate swap contracts in which the Group agrees to exchange its variable rate obligations for fixed rate obligations. Although not accounted for as being hedge effective, the swaps are held for risk management purposes and not for trading purposes. These swaps are defined as cash flow hedges and the fair values are determined by discounting the future cash flows using the mid point of the sterling yield curve prevailing at the year end.
Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability.
Provisions are recognised in the balance sheet when there is a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset's useful life and the lease term. Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Rental income received under operating leases is credited to the income statement on a straight line basis over the lease term.
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
The Group operates a defined contribution pension plan. The scheme is funded through payments to insurance companies. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For a defined contribution plan, the Group pays contributions to publicly or privately administered pension insurance plans on a contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Exceptional Items Exceptional items comprise material changes in the values of its freehold, long leasehold properties and derivative financial instruments and impairments of operating lease premiums recognised in the income statement, as exceptional items. This is due to the profits and losses not being directly attributable to the trading performance of the Group.
The Directors consider that within the one business there are two main types of income; managed house income and tenanted house income. These are considered to be part of the same segment.
UNCERTAINTY The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates and judgments that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation were:
3. EXCEPTIONAL ITEMS
revaluations
released on revaluation
released on reclassification of short leasehold property
losses
for the periods before other comprehensive income
Earnings from Continuing and Total
Operations
profit attributable to equity shareholders Number of Shares
for the purpose of dilutive earnings per share
the subscription rights attached to outstanding share options.
were anti-dilutive for those periods however could potentially dilute basic
6. DIVIDENDS No dividends were paid or proposed in the last two interim periods.
COST/VALUATION
DEPRECIATION
period
NET BOOK VALUE
COST/VALUATION
restated
DEPRECIATION
period
NET BOOK VALUE
COST
AMORTISATION AND IMPAIRMENT LOSSES
NET BOOK VALUE
COST
2008
AMORTISATION AND IMPAIRMENT LOSSES
NET BOOK VALUE
Authorised:
Called up, allotted and fully paid:
10. PRIOR YEAR ADJUSTMENTS
The division of the short leasehold property into operating leases and leasehold improvements has resulted in an amortisation charge of £295,688 against the operating leases and a depreciation charge of £157,853 against the leasehold
10. PRIOR YEAR ADJUSTMENTS - continued
OPERATING ACTIVITIES
11. CONTINGENT LIABILITIES The company has provided a cross guarantee to other members of the Group in respect of Group bank borrowings. The company's previous nominated supplier of beers, wines, spirits and soft drinks was Standwood Taverns Limited. The Group has provided guarantees to three suppliers of Standwood Taverns Limited in respect of liabilities incurred by Standwood Taverns Limited on the Group's behalf. At the date of signing the interim financial statements, a claim has been received from one of the three suppliers for £1.1 m. This claim is subject to a counter claim from Standwood Taverns Limited and it has yet to be established if any residual claim under the guarantee would be valid.
On 10 September 2009 the Directors applied to the courts for the appointment of administrators to Moorgate Taverns Limited, a wholly owned subsidiary of Pubs'n'Bars Plc with immediate effect. There are no guarantees from Pubs'n'Bars Plc. to Clydesdale Bank Plc in respect of Moorgate Taverns Limited's borrowings and the net effect on cashflow will be an interest saving of approximately £150,000 per annum by Pubs'n'Bars Plc. The book value of the pubs as at 31st December 2008 was £8.03m and the debt was £7.08m.
INDEPENDENT REVIEW REPORT TO PUBS 'N' BARS PLC Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises Consolidated Interim Statement of Comprehensive Income, Consolidated Interim Balance Sheet, Consolidated Interim Cash Flow Statement, Consolidated Interim Statement of Changes in Equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Rules of the Alternative Investment Market. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Rules of the Alternative Investment Market. Emphasis of matter - Going concern In completing our review, we have considered the adequacy of the disclosures made in note 1 to the interim financial statements concerning the Company's ability to continue as a going concern. As stated in note 1 the Company has reclassified £34,264,393 of bank loans as short term liabilities due to breaches of covenants and/or terms and conditions of the underlying agreements. The Company believes the only variation in the terms and conditions of these agreements will be a change in the interest charges. The Company's Directors' forecasts taking the increased interest charges into account have been prepared showing the Company has sufficient available funds to meet their day to day working capital requirements for the foreseeable future. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The interim financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. Kingston Smith LLP Chartered Accountants and Registered Auditors Devonshire House 60 Goswell Road London EC1M 7AD These interim results are available to be downloaded from the Company's website at www.pubsnbars.co.uk
--END-- Enquiries: Mel Belligero, Chief Executive
Stewart Dickson/Paul Shackleton
<HR>--------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange END
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