(WFC.L) Watford Leisure PLC Buy/Sell

RNS Number : 5342I Watford Leisure PLC 15 March 2010

15 March 2010

Watford Leisure PLC

("Watford Leisure" or the "Company")

Unaudited Interim Results for the six months ended 31 December 2009

Chairman's Statement

Introduction

I have pleasure in presenting the Interim Report to shareholders for the six months ended 31 December 2009.

The Watford Association Football Club Limited ("the Club") has faced a challenging first six months of the 2009/10 financial year both on and off the pitch, culminating in an eventful Watford Leisure AGM on 15 December and my appointment as Chairman on an interim basis. I have of course been involved as a Non-Executive Director for more than a year now and formed part of a Board that has been endeavouring to stabilise the financial position of the Company and provide a platform for its future success.

Background

At the start of the financial year (1 July 2009) the Board were under no illusion as to the size of the challenges that still lay ahead. The Board were starkly aware that the Club, with the loss of its parachute payment from 2009/10 onwards, needed to make significant changes as the Club entered its new financial year with revenues projected to drop from approximately £22m in 2008/09 to £10.5m in 2009/10. The Board of Watford Leisure (the "Board"), commenced the development of the Club's new five year rolling strategy in February 2009 as a response to the clear financial difficulties ahead. The Board then set about finalising the finer details of the strategy for implementation at the start of July 2009. Staffing levels across the whole Club had been reviewed and restructured such that the Club entered the new financial year with an appropriate staffing structure and a cost base reduction of 25% to 30% across its various departments. Despite all of this restructuring, it was clear that the Club had rapidly to address the football side of its business to bring about any form of financial stability.

The summer transfer window proved to be very successful for the Club in terms of incoming transfer fees but, despite this, the Board still required the Company's major shareholders to agree on the best method for raising the funds required to fill the inherited gap in the Club's finances. With no agreement in place between the two largest shareholders, Fordwat Limited ("Fordwat") and Valley Grown Salads ("VGS"), VGS nevertheless supported the Club over the course of 2009 with a series of loans. As we entered the AGM on the 15 December 2009, uncertainty over the Club's future financing remained. The subsequent resignations of the three Board Directors representing VGS and the demand for repayment of the outstanding VGS loans immediately prior to the AGM commencing, regrettably left the Club very close to administration. The Board was thankful to Fordwat for their support in stepping in to clear the VGS loans, thereby ensuring that the Club avoided being forced into administration and their further commitment to underwrite a £7.5m fund raising. It is currently envisaged that successful completion of the proposed fundraising, hopefully in April/May 2010, will see the Club firmly established as a viable and vibrant enterprise with a more robust financial future and a sound platform for progress both on and off the field.

A four man Board, independent of the two major shareholders, consisting of David Fransen (Non-Executive Director), Stuart Timperley (Non-Executive Director), Julian Winter (Director and CEO) and myself (Non-Executive Chairman) is now charged with taking the Club forward. I stepped into the Chairman role at the AGM to ensure that the Club continued with the business at hand and in order to bring some normality to the night's proceedings. I subsequently accepted the role of Interim Chairman and have now agreed to act as Chairman of the Club going forward. The Board believes that, once the proposed fund raising has been implemented, the Club can pursue its key business and community objectives with confidence and restore harmony and stability for our fans, shareholders, staff, players and partners alike.

Financial Overview

The key financial and performance indicators are as follows:
Unaudited Unaudited
half year ended half year
ended
31 December 31 December

£'000 £'000
Revenue 5,163 10,990
Cost of sales (7,444) (10,552)
Administrative expenses (1,860) (3,330)
Other operating income 265 261

Operating loss before interest, player trading,
amortisation and exceptional items (3,876) (2,631)
Loss before taxation (172) (2,279)

Financial Review

The interim results reflect the Club's first period without parachute payments from the Premier League and the consequent significant reduction in revenue levels. Revenue for the first six months of the year was £5,163,000 (2008: £10,990,000) and the loss on ordinary activities after taxation was £172,000 (2008: £2,279,000), reflecting the reduction in our cost base and increased profits from player trading.

Matchday revenue to 31 December 2009 is £2,043,000 compared with £2,647,000 to the same date in 2008. Season Ticket income is £350,000 down to date which is a reflection of the price reductions offered for the 2009/10 campaign combined with a reduced number of Season Ticket holders of circa 700. Matchday revenue to 31 December 2008 included net Carling Cup income of approximately £270,000; the net position to 31 December 2009 is much lower at £61,000 due to an earlier exit from this cup competition and the fact that during the 2008 campaign the Club had four home cup fixtures, two against Premiership opposition. The remainder of the shortfall is in catering and this is due to five fewer home games in the same period this year compared to last, one league and four Carling Cup games.

Media revenue has fallen by £4,941,000 to £2,249,000. Total Football and Premier League distributions to the Club fell by £4,960,000. Premier League distributions were £6,179,000 during the equivalent six month period in 2008but only £577,000 in 2009 and this includes 50% of the new solidarity payment, as well as residual parachute payments. The League Award income from the Football League is £645,000 higher than during the same period last year as its full year distributions are significantly improved on the previous year. TV income is slightly up with two home games having been televised generating £200,000. In 2008, one home league match and one Carling Cup match had been televised generating income of £160,000. Programme income has reduced by £20,000 - a new contract was entered into this season at a reduced level versus the previous year's deal.

Commercial revenues are significantly reduced against the same period last year with income of £871,000 against £1,153,000. Revenue generated from Saracens' catering is £68,000 down to date, with conference and banqueting and other sundry revenue reduced by £19,000. Sponsorship and advertising income makes up the remainder of the shortfall.

Cost of sales has reduced by £3,108,000, the majority of this being football related cost savings of £2,598,000. This is evidence of the work being undertaken to restructure football costs to reduce them to a more manageable and affordable level. The cost of sales figure to 31 December 2008 included provisions for termination settlements and the forecast full year reduction is estimated to be approximately £4,500,000. The balance relates to cost savings across the remainder of the business.

Administrative expenses have also fallen by £1,470,000. This reduction includes £904,000 on salaries costs. However the period to 31 December 2008 contained a provision relating to a claim by Mark Ashton (the Club's former CEO) which was subsequently not utilised. Other administrative costs declined by £566,000 including a reduction in the depreciation charge of £201,000.

The profit realised on player disposals in the period is £4,484,000. This primarily relates to profits arising from the sales of M Williamson, T Smith, T Priskin, T Robinson and J McAnuff (totaling approximately £4.2m). The balance relates to appearance fees paid in relation to players transferred in previous seasons. Amortisation is significantly reduced, due to the reduced value of capitalised player registrations.

Financing costs fell by £123,000. The prior year included amounts relating to the financing of bought forward player transfer monies.

The cost reduction measures undertaken to compensate for the loss of the parachute income have gone someway to managing its adverse impact on the Club. However, with an operating loss before interest, player trading and amortisation of £3,876,000 for the six month period, there is still further ongoing work required to ameliorate this loss making position. The profit on player disposals has offset the loss for the period and reduced it to £172,000. It is most likely that the Club will continue to trade players going forwards in order to reduce its potential operating losses before interest, player trading and amortisation.

Cash absorbed by operations was £3,829,000 and cash generated by player sales in the period totalled £1,767,000. Cash absorbed by player purchases was £1,507,000; this includes amounts payable on players purchased in previous years, most notably the final instalment relating to the purchase of N Ellington. New loans resulted in a cash inflow of £3,466,000 - VGS advanced further monies during the period, increasing its aggregate loan position from £1,468,000 at 30 June 2009 to £4,883,000. This loan was repaid by Fordwat on 21 December 2009. The Fordwat loan as at 31 December 2009 totalled £4,941,000 including accrued interest and fees due on VGS's loan at repayment. Overall, there was a net cash outflow of £480,000 against an outflow of £2,223,000 for the equivalent period last year.

As evidenced from the above financial review, the Club has been operating as a going concern thanks largely to the valuable financial support received from its major shareholders (and Directors) and such support will most likely continue to be required until costs can be further brought in line with revenues.

The Team and Football Management

The Board would like to thank Malky Mackay (Team Manager) and his staff and players for their tremendous efforts in the season to date. Despite the major transitioning of the squad the performances on the pitch have been a credit to all concerned. The Club has set out to be a competitive Championship Club and Malky Mackay has lead the squad in a positive and professional manner and established a real sense of togetherness amongst the players and staff as the Club seeks to reinsert its strong identity and footballing credentials. The Board has supported the manager through the acquisition of players to develop the squad and the introduction of key loan players to supplement the playing staff further as the Club rectifies its off-pitch financial position. The Club now has in place rigorous processes to support the acquisition of players and the efforts of John Stephenson (Head of Football Business and Development), Malky Mackay (Manager) and Julian Winter (CEO) are vital to ensuring that the Club secures the right kind of players in line with the financial model established in the Club's business strategy. As a Board, we should never lose sight of the fact that we are a competitive and proud football club and will do all we can to support the development of a successful football team on the pitch. We have now set out a clear path for the Club to follow and the shape of the football squad required and we feel that the Club is making progress week on week in this critical area.

Looking ahead

Despite the pressures we have experienced and the scale of the Club, there are many elements of our activities that differentiate us as a Club and of which we should be proud. The Club has a unique Academy in partnership with the Harefield Academy in Hillingdon and the Board has ensured that the Academy will be at the heart of its football development programme moving forwards. It is vital that the Club is excellent at developing its own talent and builds on its already impressive reputation and track record to date. In addition, we have an award winning Community Sports and Education Trust that facilitates the Club's well established traditions as a family and community Club and this is also central to our future plans. As Chairman, I will be doing my utmost to ensure that we really embed that sense of community spirit across all aspects of the Club's work and out into the communities we serve. It is a really important for the Board to ensure that local people feel part of our football Club.

The Club's key worker housing development is progressing well with completion due in April 2010. The Club will then vacate its Wolsey Park Offices and return to Vicarage Road in the South Stand. The Board will also be assessing every opportunity to complete the South West Corner changing rooms, media and match day operations facilities so that the East Stand can eventually be demolished. Such capital intensive projects will need to be financed independently and in partnership with both public and private sector organisations - but we as a Board should not take our eye off how important these development projects are to the long term sustainability and infrastructure of the Club.

In conclusion, the Board would like to express its sincerest thanks to all members of staff for their hard work, dedication, expertise and vigilance in the face of real challenge. The Board is proud of the Club, its sense of direction and the people responsible for taking us there day to day. We also thank all shareholders and supporters for your unswerving loyalty - a support that is essential going forward as we seek to progress both on and off the pitch.

The Board feel that we can realistically move forward more positively, but it will require a constant emphasis on managing the balance between developing the football side of the Club and ensuring a sustainable level of costs. We will be doing our utmost to do the very best for the Club and hope you all join us on the journey.

Graham Taylor

Chairman

15 March 2010

Consolidated income statement for the half year ended 31 December 2009

Unaudited Unaudited Audited
half year ended half year ended year
ended
31 December 31 December 30 June

£'000 £'000 £'000
Revenue 5,163 10,990 23,079
Cost of sales (7,444) (10,552) (19,792)
Gross (loss) / profit (2,281) 438 3,287
Administrative expenses (1,860) (3,330) (5,348)
Other operating income 265 261 1,115
(3,876) (2,631) (946)

Amortisation and impairment of costs
of players' registrations (597) (2,317) (4,293)
Profit on disposal of players' 4,484 2,952 3,774

registrations

Operating profit / (loss) 11 (1,996) (1,465)
Financing income - 23 44
Financing costs (183) (306) (566)
Loss before taxation (172) (2,279) (1,987)
Taxation - - -
Loss for the period £(172) £(2,279) £(1,987)

Attributable to:
Equity holders of the parent £(172) £(2,279) £(1,987)
Loss per ordinary 1p share (0.4p) (5.2p) (4.5p)

(basic and diluted)

Consolidated balance sheet as at 31 December 2009
Unaudited Unaudited Audited
31 December 31 December 30 June

£'000 £'000 £'000

Non-current assets
Property, plant and equipment 12,662 13,830 12,880
Intangible assets 970 4,468 2,218

13,632 18,298 15,098

Current assets
Inventories 176 306 120
Trade and other receivables 5,714 2,159 2,480
Cash and cash equivalents 22 78 59

5,912 2,543 2,659

Total assets 19,544 20,841 17,757

Current liabilities
Interest bearing loans and 6,233 718 3,587

other borrowings
Trade and other payables 2,736 5,353 4,880
Deferred revenue 2,772 5,751 2,234

11,741 11,822 10,701

Non-current liabilities
Interest bearing loans and 3,563 3,647 2,385

other borrowings
Trade and other payables 330 1,580 589
Deferred revenue 29 31 29

3,922 5,258 3,003

Total liabilities 15,663 17,080 13,704

Net assets £3,881 £3,761 £4,053

Equity Capital and reserves
Called up share capital 439 439 439
Special reserve 10,409 10,651 10,409
Retained deficit (6,967) (7,329) (6,795)

Total equity £3,881 £3,761 £4,053

Consolidated cash flow statement for the half year ended 31 December 2009
Unaudited Unaudited Audited
half year ended half year ended year
ended
31 December 31 December 30 June

£'000 £'000 £'000

Operating activities
Loss before taxation (172) (2,279) (1,987)
Amortisation of intangible 597 2,317 4,293

fixed assets
Depreciation of property, 376 514 1,340

plant and equipment
Net profit on disposal of - - 1

sundry fixed assets
Profit on disposal of players' (4,484) (2,952) (3,774)

registrations
Financing income - (23) (44)
Financing costs 183 306 566
(Increase) / decrease in (56) (169) 17

inventories
Decrease in receivables 519 755 77
(Decrease) / increase in (792) 1,241 (2,483)

payables and deferred income
Cash absorbed by operations (3,829) (290) (1,994)

Cash flows from investing activities
Purchase of intangible fixed (1,507) (1,816) (3,424)

assets
Purchase of property, plant (158) (478) (424)

and equipment
Proceeds from sale of 1,767 6,641 8,538

intangible fixed assets
Proceeds from sale of - - 1

property, plant and equipment
Net cash generated by 102 4,347 4,691

investing activities Cash flows from financing activities
Advances of debt 3,466 2,604 4,373
Repayments of debt (85) (8,618) (9,133)
Interest received - 23 44
Interest paid (134) (289) (576)

Net cash generated by / (used 3,247 (6,280) (5,292)

in) financing activities Net decrease in cash
and cash equivalents (480) (2,223) (2,595)

Cash and cash equivalents at (556) 2,039 2,039

start of period
Cash and cash equivalents at £(1,036) £(184) £(556)

end of period
Cash and cash equivalents 22 78 59

comprise: Cash and cash equivalents
Bank overdraft (1,058) (262) (615)

Total £(1,036) £(184) £(556)

Consolidated statement of changes in equity for the half year ended 31 December 2009

Share Special Retained
capital reserve earnings Total
£'000 £'000 £'000 £'000
Equity shareholders funds at 1 439 10,651 (5,050) 6,040

July 2008
Loss for the period - - (2,279) (2,279)
Equity shareholders funds at 439 10,651 (7,329) 3,761

31 December 2008
Profit for the period - - 292 292
Losses extinguished - (242) 242 -
Equity shareholders funds at 439 10,409 (6,795) 4,053

30 June 2009
Loss for the period - - (172) (172)
Equity shareholders funds at 439 10,409 (6,967) 3,881

31 December 2009

Notes to the unaudited interim financial information

for the six month period ended 31 December 2009

1. Basis of preparation

These interim financial statements for the six month period ended 31 December 2009, comprising the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement and Consolidated Statement of Changes in Equity and accompanying notes, have been prepared using the historical cost convention and in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union and the AIM Rules for Companies, save that the Group has elected not to adopt IAS34 'Interim Financial Reporting'. These IFRS interim financial statements do not include all the information required for full IFRS annual financial statements.

These interim results do not constitute statutory accounts within the meaning of s435 of the Companies Act 2006. The financial information in this report for the six months to 31 December 2009 and 31 December 2008 has not been audited. The comparative figures for the year ended 30 June 2009 are extracted from the Group's audited financial statements for that period as delivered to the Registrar of Companies and filed at Companies House and prepared in accordance with the Companies Act 2006. They do not constitute the financial statements for that period.

Those financial statements received an unqualified audit report which did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006 but did include an emphasis of matter paragraph in the auditor's report relating to going concern. In this context the Group has prepared cash flow forecasts for the period to 30 June 2014. These show that additional shareholder funding will be required in the period to 30 June 2010. The Directors remain confident that shareholder funding will be forthcoming in the period required and therefore, also consider it appropriate to prepare the interim results on a going concern basis. The interim results do not include any adjustments that would result should this not be the case.

The interim financial statements have also been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 30 June 2010, and which are also consistent with the accounting policies applied for the year ended 30 June 2009 except for the adoption of new standards and interpretations.

The comparative information for the period to 31 December 2008 previously disclosed losses attributable to minority interests as separate items. These losses are now treated as wholly attributable to the parent company.

2. Revenue analysis

Unaudited Unaudited Audited
half year ended half year ended year ended
31 December 31 December 30 June

£'000 £'000 £'000

Matchday 2,043 2,647 4,986
Media 2,249 7,190 14,504
Commercial 871 1,153 2,039
Other - - 1,550

£5,163 £10,990 £23,079

Revenue streams comprise:

Matchday - season and matchday tickets and corporate hospitality income

Media - television and broadcasting income, including distributions from the FA Premier League broadcasting agreements, Football League funding, cup competitions and local radio

Commercial - sponsorship income, merchandising, conference and banqueting and other sundry income

Other - player loan fees receivable

3. Taxation

After taking into account the projected performance for the next six months and unutilised tax losses, no provision for taxation is required.

4. (Loss)/earnings per share

Loss per ordinary share has been calculated as follows:

Unaudited Unaudited Audited
half year ended half year ended year ended
31 December 31 December 30 June

£'000 £'000 £'000

Loss for the period £(172) £(2,279) £(1,987)

Weighted average number of shares in issue 43,885,693 43,885,693 43,885,693

Loss per ordinary share (0.4p) (5.2p) (4.5p)

5. Availability of Interim Report

A copy of these interim results will be made available for inspection at the Company's registered office during normal business hours on any weekday. The registered office is at Vicarage Road Stadium, Watford, Hertfordshire WD18 0ER. A copy can also be downloaded from the Company's website at www.watfordleisureplc.com. Watford Leisure PLC is registered in England and Wales with registered number 03335610.

Enquiries:

Watford Leisure PLC

Tel: 01923 496 000

Graham Taylor, Chairman

Julian Winter, Chief Executive Officer

Strand Hanson Limited

Tel: 020 7409 3494

Rory Murphy

This information is provided by RNS The company news service from the London Stock Exchange

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RNS Number : 5334I Watford Leisure PLC 12 March 2010

Watford Leisure PLC

("Watford Leisure" or the "Company")

Update re Related Party Loan from Fordwat Limited

Further to the announcement of 23 December 2009 in respect, inter alia, of the related party loan received from Fordwat Limited ("Fordwat"), Watford Leisure announces that on 24 February 2010 the Company and its subsidiary, The Watford Association Football Club Limited, granted security over the Vicarage Road Stadium to Fordwat in connection with its outstanding loan with the charge documents sent to Companies House for registration on 5 March 2010.

The secured loan of approximately £4.99 million (including accrued interest since 23 December 2009) is repayable on demand and accrues interest at the rate of 4.5 per cent. above the base rate of Barclays Bank plc (except in default when the rate rises to base rate plus 7.5%). The security is by way of a guarantee and debenture ranking behind the existing secured creditors.

The board is continuing to refine the proposal from Fordwat for a £7.5 million underwritten fundraising and further announcements will be made in due course.

Enquiries:

Watford Leisure PLC

Tel: 01923 496 000

Graham Taylor, Chairman

Julian Winter, Chief Executive Officer

Strand Hanson Limited

Tel: 020 7409 3494

Rory Murphy

This information is provided by RNS The company news service from the London Stock Exchange

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RNS Number : 0681G Watford Leisure PLC 25 January 2010

Watford Leisure PLC

("Watford Leisure" or the "Company")

Related Party Loan

Watford Leisure announces that on 25 January 2010, the Company's 96 per cent. owned subsidiary, The Watford Association Football Club Limited ("WAFC"), entered into a loan agreement with David Fransen, a Non-Executive Director of the Company. The agreement is in respect of a short term unsecured loan of up to £500,000 to WAFC for the purpose of assisting with the working capital requirements of the business including potential player transfer activity during the January transfer window (the "Loan").

The Loan accrues interest at the rate of 3.5 per cent. above the base rate from time to time of Barclays Bank plc and is repayable on or before 31 May 2010.

The provision of the Loan is deemed to be a related party transaction under the AIM Rules for Companies. Accordingly, the independent directors of the Company consider, having consulted with Strand Hanson Limited, that the terms of the Loan are fair and reasonable insofar as the Company's shareholders are concerned.

Enquiries:

Watford Leisure PLC

Tel: 01923 496 000

Graham Taylor, Interim Chairman

Julian Winter, Chief Executive Officer

Strand Hanson Limited

Tel: 020 7409 3494

Rory Murphy

Square1 Consulting Ltd

Tel: 020 7929 5599

Paul McGoohan

David Bick

This information is provided by RNS The company news service from the London Stock Exchange

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RNS Number : 6451E Watford Leisure PLC 23 December 2009

Watford Leisure PLC

("Watford Leisure" or the "Company")

Related Party Loan and Update on Financial Position

Watford Leisure announces that on 21 December 2009 Fordwat Limited ("Fordwat") paid approximately £4.93 million to Valley Grown Salads ("VGS") in full and final settlement of VGS' demand of 15 December 2009 for full repayment of approximately £4.88 million in loans previously made available to the Company. The sum of £4.93 million paid by Fordwat included accrued interest and a contribution to the legal fees of VGS (in accordance with its right to demand such a contribution and interest under the loan agreement between VGS and the Company).

In connection with the above payment, on 21 December 2009 Watford Leisure signed an agreement with Fordwat for a loan to the Company of approximately £4.93 million (the "Fordwat Loan"), repayable on demand and accruing interest at the rate of 4.5 per cent above the base rate of Barclays Bank plc (except in default when the rate rises to base rate plus 7.5%). Furthermore, it is the understanding of both Watford Leisure and Fordwat that security over the Vicarage Road Stadium for the Fordwat Loan, replacing that of VGS, will be put in place in due course. The purpose of the Fordwat Loan was to prevent the Company being placed in administration by VGS.

As Fordwat holds approximately 37.16 per cent. of the issued share capital in Watford Leisure it is considered to be a "Related Party" under the AIM Rules for Companies. Accordingly the directors of the Company consider, having consulted with Strand Hanson Limited, that the terms of the Fordwat Loan are fair and reasonable insofar as the Company's shareholders are concerned.

The board of Watford Leisure ("Board") estimates that the Company now requires £4.7 million to cover its projected cash flow requirements for the period to 30 June 2010. As previously announced the Board supports a proposal from Fordwat to underwrite a £7.5 million rights issue of a debt instrument with either warrants or conversion rights, offered to all shareholders ("Rights Issue"). This proposal will take time to refine and put in place. As such the Board has determined to utilise all available funds currently held by the Company to cover the Company's working capital requirements until the end of January 2010. This includes the funds received from ticket sales from the "Playing for Players" concert to be held in June 2010 but with the expectation that these funds will be restored on completion of the Rights Issue. At the end of January further short term funding will be needed to cover working capital requirements until the Rights Issue can be finalised.

Trading in Watford Leisure's shares resumes on AIM with immediate effect. Further announcements will be made in due course.

Enquiries:

Watford Leisure PLC

Tel: 01923 496 000

Graham Taylor, Interim Chairman

Julian Winter, Chief Executive Officer

Strand Hanson Limited

Tel: 020 7409 3494

Rory Murphy

Square1 Consulting Ltd

Tel: 0207 929 5599

Paul McGoohan

David Bick

This information is provided by RNS The company news service from the London Stock Exchange

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