Clubhaus, the Leisure Group, announces unaudited interim results for the six months ended 31 March 2003.
Key points:
Trading encouraging across the Group
Seven Country Clubs performing well
Compelling development opportunities at four remaining clubs, though further financing required
7,000 new members during the first half of the financial year
Central overhead reduced
Disposal of final non-core businesses – Three Rivers and the Fox Club
Thierry Delsol and Paul Stephens appointed to the Clubhaus board as Chief Operating Officer and Finance Director respectively
Financials:
Turnover up to £11.7m from £10.8m, based on the continuing activities at the 11 core clubs
Operating margin before depreciation and central costs improved from 14% to 21%, based on the continuing activities at the 11 core clubs
Profit before interest and tax of £531,000 (2002: loss of £4m)
Net debt reduced to £57.7m (2002: £103.3m)
Chairman’s Statement
Trading review
The core business, which consists of the 11 Clubs listed in this statement, has traded well during the first half of the financial year. The results from all 11 Clubs are pleasing with trading ahead of the comparative period. The seasonally stronger second half of the year remains all-important and has begun encouragingly with a high renewal rate and strong operating revenues in April. The seven Clubs that have been developed into “Country Clubs” have led the way in terms of performance and the prospects for these Clubs are very encouraging. The development opportunities that exist at the four remaining Clubs remain compelling, although reliant on new capital or some form of off balance sheet finance.
The Clubhaus product is proving to be robust during a difficult trading environment, with over 7,000 new members signed up since the start of the financial year across the core 11 Clubs. We have successfully consolidated the Group’s central operations, resulting in both a reduction in central overheads and in administrative costs incurred at Club level. Margins have seen a small improvement from the comparative period.
Disposals
During the first half of the financial year we disposed of the two remaining non-core Clubs, Three Rivers and The Fox Club. The proceeds from these disposals were approximately £3.75 million (of which £1.45 million was received after the balance sheet date) and have been used to reduce the Group’s borrowings. Provided that the financial gearing of the Group can be reduced by other means, there are no plans to dispose of any of the remaining operating businesses which form the core portfolio. However, there are opportunities to realise value from the estate through the development and sale of ancillary land. Modest success has been enjoyed in this area over the past two years and we believe this can be repeated in the coming months.
Strategy
The operational strategy for the Group has two clear goals.
Firstly, we intend to continue to focus on the UK Country Club business and to improve the returns from these Clubs. Performance of these businesses has continued to improve, both in terms of membership and other sales, whilst efforts to reduce overheads and improve margins have also been successful.
Secondly, we wish to develop the four remaining Clubs, which currently do not offer health and fitness facilities, into Country Clubs. Currently, the Group’s level and cost of borrowings prevent it from fulfilling these development plans. However, total debt has been reduced substantially over the past 12 months and we are working on initiatives to continue this reduction, which ultimately will allow the developments to take place.
Bank borrowings
In conjunction with a review of the Company’s capital base, we are currently discussing a new bank facility with Barclays to better assist the delivery of the Group’s strategy. The existing medium term loan facility with Barclays stood at £37.0 million at 31 March 2003 (£41.0 million at 30 September 2002) and has subsequently been reduced to £36.4 million. In addition the Group has an overdraft facility with Barclays of £1.3 million (£1.3 million at 30 September 2002).
Two medium term loan facilities are in place with The Royal Bank of Scotland, which on a combined basis stood at £4.1 million at 31 March 2003 (£4.3 million at 30 September 2002) and have subsequently been reduced to £4.0 million.
Bond arrangement
In December 2002, the Company exercised its option to pay the interest due on the bond for the period 17 May 2002 to 31 December 2002 in kind, via the issue of new bonds representing a coupon of 10%. The bond principal (par value) has therefore increased from £15.0 million to £15.9 million. Under FRS 4 “Accounting for capital instruments”, the bonds are stated in the balance sheet net of approximately £1.1million of costs associated with their issue. The bonds carry a coupon of 8% in 2003 and 12% thereafter, but carry an option to pay the interest for the year ending 31 December 2003 in kind at the rate of 10%. For presentational purposes only, interest for the period 1 January 2003 to 31 March 2003 has been accrued at a rate of 8%.
Board
As was reported in the last Report and Accounts, Thierry Delsol joined the Board as Chief Operating Officer on 18 December 2002.
In addition, I am pleased to announce the appointment of Paul Stephens as the new Finance Director with immediate effect. Paul has been performing the role of Chief Financial Officer since the restructuring and we all welcome him onto the Board.
Fixed Assets
In accordance with FRS 15 “Tangible Fixed Assets” the fixed assets have been valued at 31 March 2003 by the Directors. No adjustment has been made to the carrying values
Staff
I would like to thank all of the Clubhaus team. The trading improvement year on year is a clear testament to our staff’s continued expertise and professionalism.
Dividend
An interim dividend is precluded.
Conclusion
The performance of the core business has reinforced our belief in the potential of the UK Country Club strategy. The undeveloped planning consents give the Group an opportunity to pursue this strategy and add value to shareholders’ equity. The primary challenge is to overcome the restrictive and high level of borrowings, thereby permitting the release of the undoubted potential within the portfolio.
John Hume
Chairman
16 May 2003
Benton Hall Golf Club, Witham, Essex **
Castle Royle Golf and Country Club, Knowl Hill, Berkshire *
Chartham Park Golf Club, East Grinstead, West Sussex **
The Essex Golf and Country Club, Earls Colne, Essex *
Mapledurham Golf & Health Club, Mapledurham, Berkshire *
Mentmore Golf & Country Club, Mentmore, Bedfordshire *
The Club at Meyrick Park, Bournemouth, Dorset *
Nizels Golf and Country Club, Hildenborough, Kent *
Seedy Mill Golf Club, Lichfield, Staffordshire **
The Tytherington Club, Tytherington, Cheshire *
The Warwickshire, Leek Wootton, Warwickshire **
* Country clubs constructed
** Country club planning consent obtained
Clubhaus www.clubhaus.com