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2009-10-29 07:04
Blacks Leisure Group - Interim results |
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RNS Number : 5565B Blacks Leisure Group PLC 29 October 2009 Blacks Leisure Group plc ("Blacks Leisure" or "the Group") Half-Yearly Results for the 26 weeks ended 29 August 2009
2009 2008
Neil Gillis, Chief Executive, said: "In the current economic environment it is clear that more radical restructuring measures are needed to free the core Outdoor business from the burden of the loss-making Boardwear business and a tail of stores that have not traded profitably for many years. We will work with our advisors, KPMG, to implement the restructuring plan which will enable us to eliminate these losses. We expect to be in a position to announce further details of the restructuring shortly. We are confident that the actions taken and proposed to be taken will ultimately strengthen the business and help ensure that a strong and successful Outdoor retailer emerges from this process." Enquiries:
Marc Lombardo, Finance Director
Blacks Leisure Group plc ("Blacks Leisure" or "the Group") Half-Yearly Results for the 26 weeks ended 29 August 2009
CHAIRMAN'S STATEMENT Blacks Leisure is now 18 months into the turnaround plan announced in early 2008. Since that time the business has made significant progress, removing £8 million of cost from the Group, introducing a new Outdoor store format which has demonstrated significant potential, exiting the unprofitable O'Neill wholesale business and turning a loss-making online division into a profitable one. However, the scale of the economic reversal we have had to face during this period has been such that all of these efforts have not been sufficient to return the business to profitability. In particular the impact on the business from the loss-making Boardwear division has continued. Attempts to sell this business have been unsuccessful, and whilst the conversion of a number of Boardwear sites to the Outdoor store format has worked well, there remains a large number of sites where this will not be possible due to the proximity of existing Blacks or Millets stores. At its heart, the Group has a successful Outdoor retail estate, centred on two market-leading brands - Blacks and Millets - but the future of this core business is being jeopardised by the Boardwear losses and a tail of stores across the Group that have not traded profitably for many years. In the current economic environment it is clear that more radical restructuring measures are needed to free the core business from this burden and allow it to prosper once more. Accordingly we have been working with our advisors, KPMG, to explore a range of restructuring options which will enable us to eliminate the considerable drag of the Boardwear business and the tail of loss-making stores. On 23 September 2009 the loss-making subsidiary Sandcity Limited, which managed the 11 O'Neill stores, was placed into administration. On 30 September 2009 the Group began the consultation process to close 89 loss-making stores and to remove a further 50 roles from the head office in Northampton. In line with the standstill agreement announced on 22 September 2009 the Directors have now presented a full restructuring plan to Lloyds Banking Group in a form acceptable to the bank and which is currently being discussed with it. We expect to be able to update the market on this plan shortly. Group results Group sales in the first half decreased by 6.1% to £124.9m (2008: £133.0m). Like-for-like retail sales decreased by 1.1% (2008: 7.7%). A gross margin of 51.9% was achieved in the period (2008: 54.0%). The reduction year on year was due to the business promoting more aggressively to drive sales in the current tough economic conditions. Operating losses excluding exceptional items for the first half were £10.6m (2008: £3.8m). Loss before tax was £18.1m (2008: £6.7m). Basic loss per share was 43.06p compared to 16.79p in the first half of last year. Dividend The Board has decided not to declare an interim dividend this year as the recent performance of the business does not warrant the resultant cash outlay. We will resume dividend payments as soon as circumstances permit. Going concern In determining the appropriate basis of preparation of financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Group has agreed a standstill with its lender and is in the process of agreeing a restructuring plan, acceptable to Lloyds Banking Group, to turn the business around which, in particular, seeks to address the Group's loss-making stores and Boardwear division. More details are provided in the Financial Review and note 2. People As announced on 15 July 2009, both Claude Littner and Andrew Mallett stepped down as Non-Executive Directors to enable them to spend more time on their other business commitments. The Board would like to thank Claude and Andrew for the invaluable contribution they made to the Group. I would also like to thank our staff across the Group for their contribution to the business during what has been a very challenging period. Current trading and outlook In the 2 months ended 27 October 2009, Group like-for-like sales increased by 14.2% (2008: 0.8% decrease), as analysed in the table below:
Total retail sales were 10.0% higher (2008: 3.3% lower). Gross margins have reduced due to the closing down sales. The outcome for the full year will be heavily dependent on the negotiations with our lender and the progress of the proposed restructuring plan as well as trading over the important Christmas period.
Chairman
CHIEF EXECUTIVE'S REVIEW Against a background of continuing tough trading conditions, the first half of this year has seen an acceptable like-for-like sales performance, declining by 1.1%, but the impact on profitability of the Boardwear division and the tail of loss-making stores has clearly required the business to begin implementing a more radical package of changes as part of the turnaround plan. The further reduction in overheads at the Northampton head office and the closure of 89 loss-making stores (both subject to employee consultation) and the administration of Sandcity Limited are steps being taken to reinforce the core Outdoor business which we believe has a strong future if it can be liberated from those parts of the Group which represent a financial burden it cannot continue to carry in the current economic environment. The Outdoor division, comprising Blacks and Millets, sustained an operating loss before exceptional items, of £6.2m (2008: £0.6m profit). This performance includes the negative impact of the tail of loss-making stores which have contributed to a like-for-like sales decline of 0.6% (2008: 5.2% decline). The margin in the period also declined due to the more aggressive promotional activity to drive sales and the strengthening of the US dollar. The combination of all these factors has resulted in the loss for the period. The Boardwear division, comprising Freespirit and O'Neill, continued its poor performance, reporting an operating loss before exceptional items of £3.1m (2008: £3.1m) for the period. The decline in like-for-like sales of 4.3% (2008: 16.1% decline) coupled with a reduced margin due to the significantly increased promotional activity has been mitigated by cost savings made from the consolidation of the Boardwear business on to a single site at Swan Valley in the prior period. Further decisive action has been taken to address the losses in the Boardwear division. The transfer of the O'Neill UK wholesale operation to O'Neill Europe was completed in the period. Eight Boardwear stores were rebranded to an Outdoor format which has led to an improvement in their performance. The remaining 11 O'Neill retail stores represented approximately one third of the Boardwear division and traded at a substantial loss. After the period end the decision was taken to put Sandcity Limited, the subsidiary responsible for O'Neill in the UK, into administration, the Board having concluded that there was no reasonable prospect of restoring profitability in the medium to long term. Richard Fleming and David Costley-Wood of KPMG have been appointed as administrators. The Directors believe that the administration of Sandcity Limited will not have a material effect on the Group's other businesses which continue to trade normally. Subsequent to the period end the Group announced the closure of 89 loss-making stores across its Free Spirit, Millets and Blacks fascias, whose performance has had a considerable effect on the core Outdoor business. The vast majority of the stores to be closed have not traded profitably for many years. Excluding these stores, in Outdoor, Millets now trades from 206 stores and Blacks from 89 stores, including 6 out of town stores. In Boardwear, Freespirit now operates from 14 stores. Having agreed a standstill agreement with our lender, we have presented a restructuring plan to them, which they have confirmed is in a form acceptable to them, and is currently being discussed. As we undertake this next and most difficult phase of the turnaround plan we have benefitted greatly from the ongoing support and positive attitude of our employees and I am grateful for the way in which they have managed these testing circumstances. We have also enjoyed strong support from our suppliers who continue to provide us with the quality and quantity of product to ensure that our trading stores are fully stocked as we approach the critical Christmas trading period. Once the Group completes its restructuring action we expect that current market expectations of losses from the ongoing estate, excluding the effects of the restructuring plan and the associated costs, can still be met. However, this outcome will be dependent upon Lloyds Banking Group waiving the covenant breach, the implementation of our restructuring plan and a normal trading level through the important Christmas period. We expect to announce further details of the restructuring programme to the market shortly. We are confident that the actions taken and to be taken will ultimately strengthen the business and help ensure that a strong and successful Outdoor retailer emerges from the current restructuring.
Chief Executive
FINANCIAL REVIEW Shareholder value Basic loss per share was 43.06p (2008: 16.79p), reflecting the increase in Group operating loss. The Board has taken the decision not to pay an interim dividend (2008: £nil). Operating loss The operating loss of £16.7m (2008: £6.1m) comprises the results of the Outdoor division and Boardwear division, less unallocated costs. Unallocated costs consist of the remuneration of the Board, plus the costs of public company compliance and advisors. Goodwill The carrying value of goodwill was reviewed and the Board is satisfied that no provision for impairment is required at the current time. The review has taken into consideration the proposed restructuring plan and the steps being taken to close 89 loss-making stores. The ongoing stores are forecast to be sufficiently cash-generating over the next ten years to cover the carrying value of goodwill. Finance costs The Group's net finance costs increased to £1.3m (2008: £0.6m). The majority of the increase is due to the provision for the future unwinding of the discount factor in relation to the onerous lease provision which did not exist last year and the interest element received from a corporation tax refund from HM Revenue & Customs for overpayment in prior years, which was received last year. Underlying finance costs are flat year on year. Cash flow Cash used in operations was £2.7m (2008: £0.9m generated) and net working capital was reduced by £4.3m (2008: £1.6m), largely due to the management of Group stock levels during the period. Total inventories were £45.1m (2008: £47.2m). The year-end position was £50.1m. The capital expenditure in the period of £1.7m (2008: £2.5m) related to three main areas; store refurbishments accounted for £0.8m (2008: £1.0m) including the conversion of eight Boardwear stores and refurbishments; ongoing work to upgrade the central systems amounting to £0.7m (2008: £0.7m); and one new store opening in Bury St Edmunds amounting to £0.2m. Other project expenditure last year included £0.6m on the completion of the Swan Valley head office refurbishment. Capital investment for the full year is anticipated to be approximately £3.3m, with the remaining expenditure being focussed on ongoing improvements to the current store portfolio. Going concern In determining the appropriate basis of preparation for the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. As announced during the period, Lloyds Banking Group formally agreed to extend the Group's working capital facility to 31 August 2010. In addition to this a further announcement on 22 September 2009 stated that the Directors anticipated that there would be a breach of the August period end financial covenant under such facilities when tested. The Directors held constructive discussions with Lloyds Banking Group regarding this expected breach. Following these discussions Lloyds Banking Group agreed to a standstill in respect of any breach of the relevant financial covenant until 30 November 2009, subject to the Directors delivering a restructuring plan, acceptable to Lloyds Banking Group, addressing the future viability of the Group, including actions to achieve an exit of the Group's loss-making stores, by 30 October 2009. Any waiver of the covenant breach is likely to be conditional upon such a restructuring plan being implemented. The Directors have now delivered a restructuring plan to Lloyds Banking Group which the bank has confirmed is in a form acceptable to it and is currently being discussed. Lloyds Banking Group has therefore confirmed that the Company has satisfied its obligation under the existing standstill arrangements granted on 23 September 2009 to deliver a restructuring plan acceptable to the bank by 30 October 2009. Having prepared the proposed restructuring plan and reviewed the underlying key assumptions, the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable future. Accordingly, the Directors consider it appropriate to prepare the financial statements on a going concern basis. However, it is recognised that a material uncertainty may exist in respect of going concern if the Group fails to achieve the performance anticipated as a result of the restructuring. The Directors additionally recognise that a material uncertainty exists in that if an acceptable restructuring plan cannot be agreed with the bank and the formal waiver of the covenant breach is not forthcoming, this may cast doubt on the ongoing availability of the Group's credit facilities and hence its ability to continue as a going concern and to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets, including goodwill, to their recoverable amount and providing for further liabilities that might arise. Risks The Board continually reviews and identifies the principal business risks and uncertainties facing the Group. The Board also takes an active role in reviewing operational developments to ensure that those risks identified are managed effectively. The key risks identified by the Board include:
Foreign currencies Transaction exposure resulting from purchases in foreign currencies may be hedged by forward foreign currency transactions and currency options. The Group's policy aims to minimise any exposure with the intention of protecting the buying margin from fluctuations in the value of foreign currency. At 29 August 2009 the Group was committed to forward exchange contracts to buy US$11.5m (2008: US$22.0m). There was no commitment to any euro forward exchange contracts at 29 August 2009 (2008: EUR11.5m). The forward exchange contracts that are currently in place are sufficient to cover all of the Autumn/Winter 2009 season requirements.
Finance Director Blacks Leisure Group plc Condensed Consolidated Statement of Comprehensive Income For the 26 weeks ended 29 August 2009
Analysed as:
exceptional items
Analysed as:
exceptional items
exceptional items (302) (428) (345)
attributable to equity holders of the parent
Other comprehensive income:
of hedged items
equity
cash flow hedges
equity
(expense)/income for the
period, net of tax
for the period attributable to equity holders of the parent
Blacks Leisure Group plc Condensed Consolidated Balance Sheet As at 29 August 2009
ASSETS
Non-current assets
Current assets
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Non-current liabilities
Current liabilities
Blacks Leisure Group plc Condensed Consolidated Statement of Cash Flows For the 26 weeks ended 29 August 2009
Cash flows from operations
Adjustments for:
Cash flows from investing activities
Cash flows from financing activities
Blacks Leisure Group plc Condensed Consolidated Statement of Changes in Equity For the 26 weeks ended 29 August 2009
Other comprehensive income:
hedges
Other comprehensive income:
hedges
Blacks Leisure Group plc Condensed Consolidated Statement of Changes in Equity For the 26 weeks ended 29 August 2009
Other comprehensive income:
hedges
Blacks Leisure Group plc Notes to the Condensed Half-Yearly Statements for the 26 weeks ended 29 August 2009 1. Basis of preparation The half-yearly financial statements for the 26 weeks ended 29 August 2009 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group financial statements for the year ended 28 February 2009 which have been prepared in accordance with IFRSs as adopted by the European Union. These condensed half-yearly financial statements were approved by the Board of Directors on 29 October 2009. The results for each of the half-yearly periods have not been audited but have been reviewed by the auditors in accordance with the Auditing Practices Board guidance on Review of Interim Financial Information. The comparative figures for the year ended 28 February 2009 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's Auditors and delivered to the registrar of companies. The report of the auditors (i) was unqualified; (ii) did not include a statement under section 237 (2) or (3) of the Companies Act 1985; but (iii) drew attention to an emphasis of matter regarding a material uncertainty which may cast doubt about the Group's ability to continue as a going concern. 2. Accounting policies Basis of preparation Except as described below, the accounting policies applied by the Group in these condensed half-yearly financial statements are consistent to those applied by the Group for the year ended 28 February 2009. The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments and equity-settled share-based payments that have been measured at fair value. Sandcity Limited, a wholly owned subsidiary, was placed into administration on 23 September 2009 and as such has been accounted for under the break-up basis and its asset values have been written down accordingly, which is in accordance with IAS 10. Where necessary in order to value the assets and liabilities in Sandcity Limited the Directors have used estimates based upon amounts expected to be recovered after the balance sheet date as a precise valuation of those assets and liabilities is not available. The following new standards and amendments to standards are mandatory for the first time for the financial periods commencing on or after 1 January 2009: IAS 1 (revised) Presentation of financial statements includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive Income (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The Directors have chosen the first option. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group. IFRS 8 Operating segments. IFRS 8 replaces IAS 14 Segment reporting. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. Following a review the Group's internal management information, the previously reported operating segments of Outdoor, Boardwear and Unallocated remain appropriate. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors. Goodwill is allocated by management to groups of cash-generating units on a segment level. Going concern In determining the appropriate basis of preparation for the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. As announced during the period, Lloyds Banking Group formally agreed to extend the Group's working capital facility to 31 August 2010. In addition to this a further announcement on 22 September 2009 stated that the Directors anticipated that there would be a breach of the August period end financial covenant under such facilities when tested. The Directors held constructive discussions with Lloyds Banking Group regarding this expected breach. Following these discussions Lloyds Banking Group agreed to a standstill in respect of any breach of the relevant financial covenant until 30 November 2009, subject to the Directors delivering a restructuring plan, acceptable to Lloyds Banking Group, addressing the future viability of the Group, including actions to achieve an exit of the Group's loss-making stores, by 30 October 2009. Any waiver of the covenant breach is likely to be conditional upon such a restructuring plan being implemented. The Directors have now delivered a restructuring plan to Lloyds Banking Group which the bank has confirmed is in a form acceptable to it and is currently being discussed. Lloyds Banking Group has therefore confirmed that the Company has satisfied its obligation under the existing standstill arrangements granted on 23 September 2009 to deliver a restructuring plan acceptable to the bank by 30 October 2009. Having prepared the proposed restructuring plan and reviewed the underlying key assumptions, the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable future. Accordingly, the Directors consider it appropriate to prepare the financial statements on a going concern basis. However, it is recognised that a material uncertainty may exist in respect of going concern if the Group fails to achieve the performance anticipated as a result of the restructuring. 2. Accounting policies (continued) The Directors additionally recognise that a material uncertainty exists in that if an acceptable restructuring plan cannot be agreed with the bank and the formal waiver of the covenant breach is not forthcoming, this may cast doubt on the ongoing availability of the Group's credit facilities and hence its ability to continue as a going concern and to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets, including goodwill, to their recoverable amount and providing for further liabilities that might arise. Standards and interpretations in issue not yet adopted The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have issued the following standards and interpretations to be applied to financial statements with periods commencing on or after the following dates:
amendments to :
liquidation
hedged items
Standards
jointly-controlled entity or associate
Improvements to IFRS (2010) comprising amendments to: Amendments to various standards (generally effective for annual periods beginning on or after 1 January 2010).
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application. 3. Segment information
The Board considers the reportable operating segments in accordance with IFRS 8 to be split between Outdoor and Boardwear.
Revenue
Profit
Exceptional items: Operating (loss)/profit (10,574) (96) 4,197 Assets and liabilities
Revenue
Profit
Exceptional items: Operating loss (4,329) (4,698) (13,341) Assets and liabilities
3. Segment information (continued)
Profit
Exceptional items: Operating loss (1,822) (1,294) (2,898) Net finance costs (1,329) (640) (2,374) Loss before tax (3,151) (1,934) (5,272) Tax expense (302) (428) (345) Loss for the year attributable to equity holders of
the parent
Assets and liabilities
Revenue
Profit
Exceptional items: Operating loss (16,725) (6,088) (12,042) Net finance costs (1,329) (640) (2,374) Loss before tax (18,054) (6,728) (14,416) Tax expense (302) (428) (345) Loss for the year attributable to equity holders of
the parent
Assets and liabilities
4. Exceptional items As announced on 23 September 2009, Sandcity Limited was placed into administration and, as explained in note 15, it is no longer in a position to trade as a going concern. Accordingly, its accounts have been prepared on a break-up basis. As a result of this, the property, plant and equipment of the O'Neill stores has been fully impaired. A review of all stores' profit performance at the half year end identified 89 stores which continue to be non-cash generating. This led to the full impairment of the property, plant and equipment of those stores. Subsequently the announcement on 30 September 2009 regarding two further steps to the restructuring plan included the intention to close the 89 loss-making stores identified. There is further information in note 14 in relation to this exceptional charge. These actions have resulted in an exceptional charge of £5,571,000 in the period. A similar review at the prior year end identified 6 non-cash generating stores and the full impairment of £423,000 of the property, plant and equipment of those stores was performed. During the period the Group incurred professional fees totalling £570,000 in relation to advice for the renewal of the banking facility and the restructuring plan. It is likely that the Group will continue to incur fees of this nature through to the year end and these will be analysed as exceptional in the year end financial statements. These decisions have resulted in a total exceptional charge for the 26 weeks to 29 August 2009 of £6,141,000 (2008: £2,247,000) and the nature of these costs are shown in the table below. Due to the unfavourable trading conditions that existed last year the assumptions made at 1 March 2008, for the stores covered by the onerous lease provision, were understated. This led to an additional exceptional charge of £1,003,000 at the last half year end and a further exceptional charge of £3,153,000 during the second half giving rise to a total charge of £4,156,000 in the last financial year. The impairment of goodwill in the prior year arose from the annual impairment test and reflects the difference between the value-in-use of the related cash-generating unit and its carrying value. The impairment of £1,754,000 related entirely to Just Add Water Limited. Following the operational review of the O'Neill business, during the year ended 1 March 2008, it was decided that the O'Neill business should be relocated from Washington, Tyne & Wear to the Northampton distribution centre from where the rest of the Group operates. This led to exceptional costs totalling £1,244,000 which was charged to the Statement of Comprehensive Income in the 26 weeks ended 30 August 2008 and which related to redundancy costs, relocation costs and the write down of property, plant and equipment at the Washington site.
5. Tax expense The tax expense is calculated by applying the expected annual effective tax rate of 28.0% (2008: 28.0%) to loss before tax for the period and adjusting for deferred tax movements. 6. Loss per share The calculation of basic earnings per share is based on loss after taxation of £18,356,000 (30 August 2008: £7,156,000, 28 February 2009: £14,761,000) by reference to the weighted average of 42,626,434 (30 August 2008 and 28 February 2009: 42,626,434) ordinary shares in issue during the period. Since the Group was loss-making in the current period there is no dilution effect of the options. The Group has 2,405,616 (2008: 3,366,321) options outstanding at the end of the period that may become dilutive. 7. Dividends paid and proposed The Board does not propose an interim dividend for the 52 weeks ending 27 February 2010. There were no dividends paid during the period (2008: £nil) and there was no final dividend proposed for the year ended 28 February 2009 (2008: 1.00p) and therefore no charge to the Statement of Comprehensive Income (2008: £426,000). 8. Property, plant and equipment Additions to property, plant and equipment amounted to £1,747,000 (2008: £2,507,000). During the period an impairment to property, plant and equipment amounted to £5,571,000 (2008: £nil). Details of this impairment are described in note 4. Capital commitments contracted but not provided for by the Group amounted to £391,000. 9. Other intangible assets There were no intangible assets acquired in the period (2008: £nil). 10. Share capital There were no equity Ordinary Shares issued in this period or the prior period. At 29 August 2009 there were outstanding options to receive allotments of 2,405,616 (2008: 3,366,321) Ordinary Shares under the Executive Share Option Scheme, the Company Share Option Plan, the Share Incentive Plan and the Save As You Earn Scheme. At 29 August 2009 the middle market quotation of the Ordinary Shares, as derived from the Stock Exchange Official List, was 50.5p. The highest price attained by the Ordinary Shares during the period was 57.5p and the lowest level was 32.3p. 11. Acquisitions There were no acquisitions in the current or prior half year periods. 12. Commitments and contingencies The Group leases various buildings which operate within the Outdoor and Boardwear segments. The leases are non-cancellable operating agreements with varying terms, escalation clauses and renewal rights. The Group also has various other non-cancellable operating lease arrangements. The Company has guaranteed bank borrowings of subsidiary undertakings which at 29 August 2009 amounted to £18,654,000 (2008: £12,174,000). 13. Related party disclosures Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. The remuneration of all key personnel is set out below. The key personnel are all main Board members, subsidiary Board members or regular attendees of the subsidiary Board meetings.
There were no material transactions in which any key personnel had an interest. 14. Post balance sheet events As announced on 23 September 2009, Richard Fleming and David Costley-Wood of KPMG LLP were appointed as administrators in respect of the wholly owned subsidiary, Sandcity Limited. This follows a review by the Directors of Sandcity Limited which has concluded that there is no reasonable prospect of restoring profitability in the medium to long-term and that Sandcity Limited is no longer in a position to trade as a going concern. Further details can be found in note 15. The announcement on 30 September 2009 focussed on two further steps in the restructuring plan. First is the closure and employee consultation process on 89 loss-making stores whose performance has been a considerable drag on the core Outdoor business which has traded successfully over the last two years. The vast majority of the stores to be closed have not traded profitably for many years. Second, the Group is also in a period of consultation with employees at its Northampton head office regarding the reduction of approximately 50 roles, representing about 20% of the total head office workforce. 15. Administration of Sandcity Limited As announced on 23 September 2009, over the last 18 months, the Group has been reviewing options to exit from its loss-making Boardwear division. As part of this review the Group has successfully exited the O'Neill wholesale business, converted a number of stores from Boardwear to Outdoor fascias, and reduced the cost base through a consolidation of the Sandcity and Freespirit management functions. A disposal of the Boardwear business has also been pursued but serious interest in this business was low and structural issues made a discrete sale of this business difficult to achieve. On 23 September 2009, Richard Fleming and David Costley-Wood of KPMG LLP were appointed as administrators in respect of the wholly owned subsidiary, Sandcity Limited. Sandcity Limited is part of the Boardwear segment and is a retailer of predominantly lifestyle and Boardwear clothing and accessories. It operated from 11 stores, which traded at a substantial loss. The appointment of the administrators of Sandcity Limited results in an exit from approximately one third of the Boardwear segment. The Directors believe that the administration of Sandcity Limited will not have a material effect on the Group's other businesses which continue to trade normally. Below is the condensed income statement of the Sandcity Limited with comparatives. These are included within the Boardwear segment in note 3 Segment information.
Analysed as:
exceptional items
Analysed as:
exceptional items
items
attributable to equity holders of the parent Blacks Leisure Group plc Directors' Statement of Responsibility The Directors' confirm to the best of their knowledge:
By order of the Board
Chief Executive
Finance Director Blacks Leisure Group plc Independent Review Report to Blacks Leisure Group plc Introduction We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 29 August 2009 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Cash Flows, the Condensed Consolidated Statement of Changes in Equity and the Notes to the Condensed Half-Yearly Financial Statements. 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. 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 Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) 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 Group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our report has been prepared in accordance with the terms of our engagement to assist the Group in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. 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 26 weeks ended 29 August 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. Emphasis of matter - going concern Without qualifying our conclusion, we draw attention to the disclosures in note 2 of the condensed set of financial statements concerning the Group's ability to continue as a going concern. These include the following material uncertainties:
These events and conditions, along with other matters as disclosed in note 2, indicate the existence of material uncertainties which may cast significant doubt about the Group's ability to continue as a going concern. The condensed set of financial statements does not include the adjustments that would result if the Group was unable to continue as a going concern.
Chartered Accountants and Registered Auditors, Epsom, United Kingdom This information is provided by RNS The company news service from the London Stock Exchange END
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