RNS Number:5533C
Southampton Leisure Holdings PLC
03 September 2004
Financial highlights
* Turnover increased by 1.9% to #49.8m
* Operating profit before player trading
* decreased to #8.4m
* Dividend remained at 3p per share
* Earnings per share increased to 5.60p
I am pleased to be able to report to our shareholders that the 2003/4 financial
year has seen further progress at Southampton Leisure Holdings plc. We have
managed to increase our turnover to #49.8 million, despite the fact that we
finished four places lower in the Premier League and did not enjoy a visit to
Cardiff in the FA Cup. This turnover level establishes us amongst the largest
clubs in England which is a huge transformation from the turnover levels that we
enjoyed before our move from The Dell. The resultant profit before taxation of
#2.9 million further strengthens our balance sheet and allows us to recommend
payment of an unchanged dividend of three pence per share to those on the
register on 17 September 2004. The main financial highlights are set out in the
Financial Review on pages 6 to 7.
Football update
I am writing this report a week after the departure of Paul Sturrock who joined
us as Head Coach in March from Plymouth, following Gordon Strachan's decision to
take a sabbatical year out of football. Paul left us by mutual agreement and in
spite of his short period at the Club, we part on good terms and wish him well
with his future career. Recent press reports, particularly from the local media,
have been inaccurate. The plain facts are that our Football Club is now the envy
of many of our competitors, both in terms of our footballing and administrative
operations. It is true that we have, for various reasons, not had the same
person coaching or managing the team for a lengthy period, but it has not
stopped our footballing performance improving from the days when we considered a
finish at the top end of the bottom six to be a serious achievement. We are
fortunate that Steve Wigley has agreed to step up to the position of Head Coach
and I look forward to working with him to take the Club forward. We will be
working to further strengthen our football coaching resource whilst, at the same
time, putting together a team of people to improve all aspects of our match day
preparation. This will involve greater use of match day analysis, individual
coaching, fitness, team building, motivation and hard work. We have great belief
in the squad of footballers we have assembled at Southampton, which now includes
many international players and has recently been further strengthened by the
addition of Peter Crouch from Aston Villa, Mikael Nilsson from Halmstad, Jelle
Van Damme from Ajax, Alaeddine Yahia from Guingamp and Andreas Jakobsson from
Brondby. We have sold Fitz Hall to Crystal Palace for #1.75 million after he
made it clear that he wanted to play for Ian Dowie who managed him at Oldham,
from whom we purchased the player for #250,000. Stephen Crainey has also left us
to join Leeds and we thank both of them for their contribution to the Club in
the short time they were with us.
For the first time in 20 years we enjoyed a brief foray into European football
in qualifying for the UEFA Cup. We were drawn against Steaua Bucharest in the
first round but unfortunately this was a short lived venture. However, I would
like to pay tribute to our supporters who were a credit to both English Football
and our Club on what proved to be an extremely wet night in Bucharest!
As always, there is no room for complacency but, given our improving position
relative to our competitors, perhaps there is room for a little more confidence
which is a vital ingredient in winning football matches.
Academy update
Our Academy operation continues to make great progress. We now have the staff,
the players and the facilities to help identify and nurture the best young
footballers at ages from eight upwards. Steve Wigley and Huw Jennings, together
with all our academy staff, should be proud of the progress we have made which
was underlined by our U19 team winning the FA Premier League trophy and our U17
team narrowly failing in their attempt to do the same. We have some
exceptionally talented players who will, undoubtedly, make a contribution to the
first team in the not too distant future. This was underlined recently when we
had 15 of our academy players called up for international duty at their relevant
age.
Stadium
May 2004 saw the end of our third year at The Friends Provident St Mary's
Stadium and we continue to run one of the top football venues in the UK. Fans in
the Premier League 2004 Customer Survey voted St Mary's best in the League for
its match day experience and it was no surprise that we operated at 95% of
capacity. Chris Egelstaff and his Operations Team continue to run a very "tight
ship" and particular congratulations should go to Head Grounds man David Roberts
who won the League Championship in the annual Premier League pitch competition.
With occupancy running very high, the Ticket Office has also had a busy year
with the installation of new ticket and Customer Relationship Management
software sourced from AudienceView. Thanks to David Luker, who has taken charge
of this project, the change of system has been relatively trouble free and we
hope that fans will notice the improvement in service for internet, telephone
and personal call ticket buyers. We endeavour to be as responsive as possible to
fan needs and for the 2004/5 season have introduced an away season ticket as
well as pre-registration for popular away games.
After four years with the Club, as Head of Sales and Marketing, Paul Blanchard
left and we welcome Steve Davies as his successor. Steve joins us from Frizzell
where he was responsible for running affinity schemes with a combined membership
of over five million. We welcome T-Mobile as our mobile telephone partner and
Orchard Homes who now sponsor our senior Academy sides. Our Commercial
Department is regarded as a standard setter within the League and nowhere is
this more noticeable than in our Retail Department where Leighton Mitchell has
again achieved record turnover.
The Saints in the Community Charitable Trust has completed its first full year
of operation and under the management of Mark Abrahams and chairmanship of Huw
Jennings has extended its range of Community courses and Coaching Centres. On
top of our existing involvement with the Regeneration Partnership in Southampton
we are particularly pleased to have become involved in the Hampshire Youth
Options program in the Thornhill area as well as piloting Youth Justice Board
activity.
In conjunction with the Department of Education and Skills and Southampton City
Council our Study Support Centre has been fully subscribed. Our thanks go to
Chris Meech who, on top of running the St Mary's Study Support Centre, has been
instrumental in setting up our second Centre in Basingstoke.
Non-match day
The Stadium continues to position itself at the forefront of the conference,
exhibition and event business in the region, achieving another record year in
profit contribution from our non-match day activities, under the guidance of
John O Sullivan.
Much of the growth in event business is due to the development of sound
relationships with both our customers and our business partners. Many events
held at the Stadium are becoming annual events in the Southampton Corporate
Calendar with more and more organisations seeing us as 'the first port of call'
when seeking a suitable venue.
I would like to take this opportunity to thank the many Charitable
Organisations, with whom we have worked very closely throughout the year, for
choosing the Stadium as their venue for many high profile fundraising functions.
It is often through these events that the wider business community is first
introduced to the extensive range of facilities available at the Stadium.
The Saint
The Club's wholly owned radio station, The Saint, has broadcast on the Sky
platform and the internet since its launch in 2001. In addition, since March
2004 the station commenced broadcasting on the South Hampshire digital
multiplex. In April 2004 following the successful acquisition of Felix
Broadcasting Ltd and South City FM Ltd the station now broadcasts via a local FM
licence. The Saint now has a broadcasting platform which enables easy access for
all Saints fans.
The Saint is now the dedicated local radio station for Southampton and
surrounding areas. It delivers an all-round local radio service playing popular
music from five decades as well as local, national and international news. It
also offers local charities and organisations the means to publicise their
events and gives listeners up to the minute travel news.
Beyond this The Saint provides the most in-depth and authoritative coverage of
the Club with live match commentaries, after match phone-ins, player interviews
and features along with regular shows presented by current and former Saints
players.
The Saint is the only full-time commercial radio station in the country to be
wholly owned by a Football Club and the only radio station in the region
broadcasting simultaneously on 107.8 FM, DAB, Sky 899 and the internet.
We believe the radio station will become a significant revenue generator for the
Club.
Summary and outlook
The recent past has seen the re-negotiation of both domestic and overseas
Premier League broadcasting rights for the seasons 2004/5, 2005/6 and 2006/7.
This process was complicated by the undemocratic intervention of the European
Commission which has resulted in a great deal more product being sold to
maintain a similar position to that for the previous three years. There was a
reduction in value of the domestic rights and a welcome increase in the overseas
rights but overall we are likely to receive less broadcasting income in 2004/5
when compared with 2003/4 due to the previous distribution formula.
The football industry continues to polarise with further division between those
Clubs who have either run themselves well or have a benefactor and those Clubs
who have allowed their expenditure to exceed their income. I believe this
process will continue with the strong becoming stronger and the weak becoming
weaker, particularly if compounded by the indignity of relegation. Our prospects
within the industry remain very good but we are now very reliant upon
footballing success in both Premier League and Cup competitions if we are to
flourish financially. Our aim must be to aspire to achieve further participation
in UEFA competitions which has the opposite and beneficial effect to being
relegated.
There remains a small but vociferous contingent within our support base who are
always ready to criticise the Club in the event that we suffer a setback of any
kind, despite our substantial progress over a number of years. I believe one of
our challenges going forward if we are to move to the next level is for all our
supporters to appreciate that this is damaging. It does not happen at the most
successful Clubs and reflects badly on the "Southampton family". The Board is
intent upon taking the Club forward but can better do so with cohesive support.
We attempt to communicate as fully as possible via our website, radio station
and other Club media outlets and will continue to do so in the future.
On behalf of the Board, I would like to thank all our staff, both full time and
match day, for their dedication and excellence over the past year under review.
I believe they are amongst the best staff in the Premier League and I receive
many letters from match day and non-match day supporters/visitors complimenting
them on their professionalism.
We remain optimistic about the future outlook for the Company, always aware of
the volatile nature of the football industry.
R J G Lowe
Chairman
2 September 2004
The results for the year show a continued growth in turnover to #49.8m, an
operating profit before player trading of #8.4m, a substantial profit on player
disposal of #6.3m, player amortisation of #9.1m and a profit before tax of #2.9m
which compares with a loss before tax of #0.5m in the previous year.
Broadcasting income
Broadcasting income has risen by 7.5% in the year, as a result of:
* Improved revenues from the Premier League's domestic and overseas TV
contracts which were in the final year of the existing deals. New three
year contracts have been agreed commencing from the 2004/05 season.
* Additional facility fees. During the year seven live games were shown on
Sky together with two pay per view games. This compares with three live
games and three pay per view games in the previous period.
* Reduced merit award arises following a 12th finish in the Premier
League compared with 8th in the prior year.
Match day income
Match day income reduced by 11% in the year:
* Premier League match days at The Friends Provident St.Marys Stadium were
watched by near capacity crowds, with the average attendance increasing
from 30,680 to 31,717. Season ticket numbers increased substantially from
16,600 to 21,800 and it is pleasing to note that renewals for the 2004/05
season are at a similar level.
* Cup revenue was substantially down on the prior year when the Club
reached the final of the FA Cup. This year the Club was eliminated in the
third round of the FA Cup, the first round of the UEFA Cup and reached
the quarter finals of the Carling Cup.
* Other match day revenue from hospitality and catering has remained at a
similar level to the previous year, with the majority of the hospitality
suites operating at near capacity on a match day.
Commercial income
Commercial income rose by 15% in the year:
* The main increase was from the retail department where turnover increased
to #3.5m from #2.8m. Whilst the prior year benefited from the Club's
FA Cup run this period benefited from the launch of a new home kit. This
kit has proved extremely popular with supporters and 33,000 home shirts
were sold in the financial year
* Other increased revenue has been received from the Club's non match day
activities, an increase in the Clubs membership to 24,000 members, and
continued growth from the Clubs charity, Saints in the Community.
Operating costs before player trading
Total operating costs increased by 3% to #41.4m:
* The main costs to the Football Club are the cost of the players and
coaches, together with the costs of training facilities and the Club's
academy. These costs remained at a level comparable with the previous
year.
* Total wages and salaries for the Group reduced slightly to #26.3m, and as
a percentage of turnover reduced from 55% to 53%.
* Administrative costs have increased, partly as a result of the
acquisition of Saints Radio Ltd in March 2003.
Player trading
The net cost of player trading has reduced from #7.0m to #2.8m. The main reason
is the profit on disposal of players following the sale of Wayne Bridge to
Chelsea for #7.0m. This has been partly offset by an increased amortisation
charge, the cost of changing manager and settlement on cancellation of certain
player's contracts.
Taxation
The profit before taxation of #2.9m has given rise to a tax charge of #1.4m.
This comprises corporation tax of #0.9m and deferred tax of #0.5m.
Dividend
The Directors are proposing to maintain the final dividend at 3p per share which
amounts to #856,227.
Balance sheet
* Fixed assets reduced to #51.7m. The value of player registrations reduced
from #14.5m to #13.0m - nine players were added to the squad at a cost of
#7.6m. During the year the Group acquired Felix Broadcasting Ltd and South
City FM Ltd for a cost of #0.7m. The goodwill on acquisition of #1.0m is
shown on the balance sheet as an intangible fixed asset.
* The sale agreement for The Dell contains provisions to enable the
Company to participate in any further gain in the value of the site, if it
arises. As the site is nearing completion it is likely that any gain will
be recognised in the next financial year, although the Directors are
unable to quantify any such gain at this point in time.
* Net cash inflow for the year after taking into consideration the part
repayment of borrowings, was #3.9m; which has led to a reduction in the
level of net debt from #20.2m to #16.3m.
* Net assets have increased to #11.3m as a result of the retained
profit for the year.
D A Jones
Finance Director
2 September 2004
Operations
excluding Player
player trading trading* Total Total
2004 2004 2004 2003
Note # # # #
Turnover continuing operations 1 49,823,066 - 49,823,066 48,875,318
Cost of sales 2 (34,560,734) (9,118,563) (43,679,297) (41,058,981)
Gross profit 2 15,262,332 (9,118,563) 6,143,769 7,816,337
Administrative expenses (6,873,737) - (6,873,737) (5,827,258)
Operating profit/(loss) 3 8,388,595 (9,118,563) (729,968) 1,989,079
Profit/(loss) on disposal of - 6,311,886 6,311,886 (295,690)
players and manager
Profit/(loss) before interest and 8,388,595 (2,806,677) 5,581,918 1,693,389
taxation
Amounts written off 4 (460,000) -
investments
Net interest payable 5 (2,143,560) (2,177,446)
Profit/(loss) on ordinary 2,978,358 (484,057)
activities before taxation
Tax on profit/(loss) on ordinary 8 (1,382,788) (45,507)
activities
Profit/(loss) on ordinary 1,595,570 (529,564)
activities after taxation
Equity dividends proposed 9 (856,227) (856,227)
Retained profit/(loss) for 23 739,343 (1,385,791)
the financial year
Basic earnings/(loss) per share 10 5.60p (1.82p)
Diluted earnings/(loss) per share 10 5.60p (1.82p)
*Player trading represents the amortisation of registrations and the profit or
loss on disposal of registrations.
There are no recognised gains or losses for the current financial year and
preceding financial year other than as stated in the profit and loss account.
Accordingly, a statement of total recognised gains and losses has not been
presented.
There is no material difference between the results reported above and the
results on an unmodified historical cost basis. Accordingly, a note of
historical cost profits and losses has not been presented.
Group Company
2004 2003 2004 2003
Note # # # #
Fixed assets
Intangible assets 11 14,006,521 14,508,780 - -
Tangible assets 12 37,748,453 39,387,476 2,520,759 2,481,597
Investments 13 - - 10,190,992 9,430,992
51,754,974 53,896,256 12,711,751 11,912,589
Current assets
Stocks 14 528,777 269,853 - -
Loans 15 154,750 267,250 154,750 267,250
Debtors 16 3,086,553 3,133,795 7,797,903 7,235,128
Investments 17 415,196 - - -
Cash at bank and in hand 8,769,539 5,278,028 369,836 179,723
12,954,815 8,948,926 8,322,489 7,682,101
Creditors: amounts falling due within 18
one year (21,380,958) (19,324,082) (6,524,182) (6,321,923)
Net current (liabilities)/assets (8,426,143) (10,375,156) 1,798,307 1,360,178
Total assets less current liabilities 43,328,831 43,521,100 14,510,058 13,272,767
Creditors: amounts falling due after 19
more than one year (29,561,781) (30,754,768) - -
Provisions for liabilities and 21 (2,403,351) (2,141,976) - -
charges
Net assets 11,363,699 10,624,356 14,510,058 13,272,767
Capital and reserves
Share capital 22 1,427,044 1,427,044 1,427,044 1,427,044
Share premium account 23 3,340,433 3,340,433 3,340,433 3,340,433
Other reserves 23 1,028,248 1,028,248 7,538,551 7,538,551
Profit and loss account 23 5,567,974 4,828,631 2,204,030 966,739
Equity shareholders' funds 24 11,363,699 10,624,356 14,510,058 13,272,767
These financial statements were approved by the Board of Directors on 2
September 2004.
Signed on behalf of the Board of Directors.
D A Jones
Director
2004 2003
Note # # # #
Net cash inflow from operating activities 28a 11,834,821 15,186,847
Returns on investments and servicing
of finance
Interest paid (2,298,595) (2,270,020)
Interest element of finance lease (9,739) (9,739)
rental
Interest received 144,732 91,839
Net cash outflow from returns on
investments and servicing of (2,163,602) (2,187,920)
finance
Taxation
Corporation tax paid - -
- -
Capital expenditure and financial investment
Proceeds on sale of tangible fixed assets 255 -
Payments to acquire tangible fixed assets (950,793) (1,050,980)
Proceeds on disposal of players' 6,782,478 4,248,884
registrations
Payments to acquire players' registrations (9,939,690) (9,036,976)
Net cash outflow from capital
expenditure and financial (4,107,750) (5,839,072)
investment
Acquisitions
Payments to acquire subsidiary undertaking 29 (294,000) (19,588)
Cash/(overdraft) acquired within subsidiary 6,824 (843)
Net cash outflow from acquisitions (287,176) (20,431)
Equity dividends paid (856,239) (593,212)
Cash inflow before use of liquid
resources and financing 4,420,054 6,546,212
Management of liquid resources
Purchase of current asset (415,196) -
investments
Financing
Purchase of own shares - (1,104,955)
Bank loans - 1,000,000
Repayment of borrowings (527,740) (48,694)
Net cash outflow from (527,740) (153,649)
financing
Increase in cash in the year 28b 3,477,118 6,392,563
Reconciliation of net cash flow
to movement in net debt
Increase in cash in the year 3,477,118 6,392,563
Cash inflow/(outflow) from decrease/
(increase)
in debt and lease financing 28b 527,740 (909,952)
Change in net debt
resulting from cash flows 4,004,858 5,482,611
in the year
Amortisation of finance (39,631) (41,354)
costs
Movement in net debt in the year 3,965,227 5,441,257
Net debt at 1 June (20,230,783) (25,672,040)
Net debt at 31 May 28b (16,265,556) (20,230,783)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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