RNS Number:7251Q
Southampton Leisure Holdings PLC
02 September 2005
Chairman's Statement
The 2004/05 financial year has seen our Club relegated from the FA Premier
League to the Championship for the first time in 27 years. Our turnover has
fallen, largely as a result of finishing 20th in the League, to #44.8m from
#49.8m. In spite of this, your Company has achieved a marginal profit, before
taxation, of #0.2m versus #2.9m last year. This result has been flattered by an
exceptional profit made on the completion and sale of the housing development on
the Club's old ground, The Dell, where we had retained a carried interest in the
final outcome. The Board is recommending a significantly reduced dividend of 0.5
pence per share to those on the register on 7 October 2005 and subject to
shareholder approval will be paid on 4 November 2005. The main financial
highlights are set out for your consideration on pages 6 to 7.
Football update
The 2004/05 season witnessed a severe footballing setback for Southampton
Football Club after a number of years of significant improvement. When I wrote
to you at the half year we were 18th in the FA Premier League with 14 games to
play. Harry Redknapp strengthened the squad over the January transfer window
with the addition of five new players. In spite of this we went into the last
game of the season needing to win at home against Manchester United to secure
our presence in the Premier League. We managed to take the lead and at half time
were still in with a good chance, but at the final whistle, we found ourselves
20th in the League and, as a result, we were relegated. Over the course of the
season we drew too many games at home, we surrendered late goals to give away
match leads and generally underperformed. This was probably best highlighted by
the result of the home games against Aston Villa and Middlesbrough, where we
lost late goals to lose and draw respectively.
The financial effects of relegation are very significant with our broadcasting
income likely to drop by approximately #18m alone. On top of this our season
ticket sales, corporate hospitality sales, sponsorship sales and almost every
other area of our business is likely to suffer. This shortfall has, to some
extent, been covered by relegation clauses in player contracts, which have
reduced our wage costs going forward. We have also sold Kevin Phillips to Aston
Villa, Peter Crouch to Liverpool, Mikael Nilsson to Panathinaikos, Paul Telfer
to Celtic, Andreas Jakobsson to Helsingborg and Jelle Van Damme has gone on a
season long loan to Werder Bremen, under which they have an option to buy him.
We have also made changes to staff numbers in other areas of our operation and
are now confident that we have the financial security to push for promotion
which we need to achieve over the coming two seasons, while we retain the
parachute payment from the Premier League. Several contracts of senior players
have expired, including Jason Dodd, Graeme Le Saux and Jamie Redknapp. Jason has
been an exemplary example of a professional footballer and deserves great credit
for the long and loyal service which he has given the Club. We all wish him the
very best at Brighton and Hove Albion, never forgetting that it is loyalty such
as his which is the foundation upon which the Club has been built. Personally I
feel I have been privileged to work with him.
Harry Redknapp has brought in Dennis Wise, Thomas Hajto, Darren Powell, Djamel
Belmadi and Ricardo Fuller over the summer, whilst presiding over a successful
pre-season and an equally encouraging start to our promotion campaign. Kenwyne
Jones, Theo Walcott, Martin Cranie, Dexter Blackstock, Nathan Dyer and Matthew
Mills have all shown great promise but we will continue to strengthen our squad
where necessary, having given consideration to both existing players and the
financial constraints which come with relegation.
Our Academy operation continues to flourish and we enjoyed our first Youth Cup
Final, which we narrowly lost to Ipswich Town, by a late goal over two legs. It
has taken us a considerable amount of time, planning and investment to build the
operation we now have at Academy level. We were all sad to lose Steve Wigley to
Manchester City Reserves but great credit should go to Huw Jennings, Malcolm
Elias, Georges Prost, Stewart Henderson and all our Academy staff for the
progress we have made. We now have some very exciting young players who have a
combination of the right mental attitude and abundant ability and who are now
beginning to contribute to our first team. Leon Best, Dexter Blackstock, Martin
Cranie, Nathan Dyer, Matthew Mills and Theo Walcott have all made first team
debuts with a great deal of promising young players behind them still to come. I
believe it is our duty to provide these players with the structure, coaching,
knowledge and guidance to enable them to become the best. In this context, I am
delighted that Clive Woodward has joined us to help us to achieve this aim. We
have been fortunate that Clive has chosen to make the switch from rugby to
football and even more fortunate that he has chosen to join our Club. He and
Harry Redknapp have been in regular contact over the past nine months and
working together will, I believe, be beneficial for both our immediate promotion
push and our longer term structural improvement. Clive has initially recruited
Simon Clifford, who has had a very successful career at Garforth Town, as well
as building up a flourishing soccer franchise focused upon the skills and
tactics which have won Brazil so many World Cups. Other areas of our playing
operation will be reviewed and strengthened if we deem it necessary. The main
emphasis will be upon all aspects of personal improvement.
Stadium
Despite relegation from the Premier League, the stadium has continued to operate
safely and efficiently under Chris Egelstaff. The commercial areas have also
performed well under Steve Davis. Both areas have been restructured to take into
account the different operational and commercial needs of the Championship and I
have every confidence that they will continue to thrive.
Non-matchday activities
The Friends Provident St. Mary's Stadium continues to be the focal point in
central southern England for a vast cocktail of events both large and small,
under the management of John O'Sullivan.
Nothing comes much larger than a live concert featuring Sir Elton John and his
band. Held at the stadium on 28 May 2005, with an audience in excess of 26,000,
the concert proved to be a stunning success in terms of both profitability and
enjoyment. Much of the operational success was brought about through detailed
and extensive planning, together with full consultation with both the local
authorities and local residents, and by the Club taking relevant professional
advice along the way. The stadium is now seen as a credible concert venue,
providing a safe and controlled environment, with the potential to attract top
performers to the Southampton region in years to come.
The quality and quantity of events being held at the stadium increases year on
year and our work with the many charitable causes, who choose to use the stadium
for many of their fundraising functions, gives us tremendous pleasure.
A great many events held at the stadium are supported by local businesses and
individuals who contribute greatly either through sponsorship or through their
regular patronage. The stadium's event calendar now acts as a catalyst, bringing
together a vast cross section of the business community, creating an extensive
business network for the benefit of all.
The Club's strong relationship with the business community, together with
maintaining a close association with FMC, our catering and events joint venture
partner, and our philosophy of providing Quality, Service and Value has provided
us with a very successful formula in the development of our non-matchday
business activities. However it is the satisfaction of our clients which is what
really counts and our pro-active approach is proving extremely successful in
achieving this.
The Saint
We continue to broadcast on the South Hampshire digital multiplex and via our
local analogue licence on 107.8FM. We have boosted our local analogue signal to
provide better coverage for local areas. Sales have grown, albeit at a slower
rate than we would have liked, and we remain confident that this business will
become a contributor to Club revenues longer term. It is also an important means
of communication with our supporters and the local community.
Summary and outlook
The period under review has been a difficult one for our Company. Relegation
from the Premier League has been problematic to manage but after a busy summer I
believe that we have both the financial and football foundation to challenge for
promotion. There are realistically nine teams who are likely to be competing for
three places and we must ensure that we are one of them. The culture of buying
football success has reached new proportions as Chelsea have continued to spend
considerable sums on both transfer fees and wages to underline their success in
winning the Premier League last season. This has put further pressure on clubs
competing with them to further stretch themselves financially. Relegation has
forced us to dramatically reduce our dependence upon this form of success and
look at other "longer term" ways of securing the Club's future. This will
inevitably involve the further development of our academy operations and the
excellent young players we are now producing. Like Jason Dodd, Matthew Le
Tissier, Francis Benali and other great servants of the Club, they will
understand our culture and objectives. Stanley Matthews and all great sportsmen
have tended to improve through a combination of hard work and ability and with
the staff, resources and young players we have at the Club, the future looks
good.
Our supporters have been very understanding over our recent difficulty and
everybody at the Club is committed to achieving promotion for them. It is
encouraging for us to see such a dedicated and loyal core to our support.
I would like to thank our staff, both full time and matchday, for their
dedication over what has not been an easy period.
We have always warned of the volatile nature of sport and football in particular
but the long term outlook for our Group remains promising in spite of our
substantial recent setback.
R J G Lowe
Chairman
1 September 2005
Financial Review
Summary
* The results for the year ended 31 May 2005 show a reduction in
turnover from #49.8m to #44.8m, which gives rise to a reduced profit before
taxation of #0.2m (2004: #2.9m). The turnover reduction primarily results from
the reduced merit fee from finishing 20th in the Premier League compared to 12th
in the previous year.
* At the end of the 2004/05 football season, Southampton Football Club
was relegated from the Premier League. This will mean a significant reduction in
turnover next year, primarily from reduced media income receivable. The
Directors are confident that they have put in place a number of cost saving and
cash generating measures in order to minimise the impact of relegation on the
financial position of the Group.
Broadcasting income
* Broadcasting income reduced by #4.4m to #20.1m. The 04/05 season saw
the start of the new three year TV deal with Sky, centrally negotiated by the
Premier League. The Basic award was reduced by #0.9m and facility fees were
reduced by #0.8m. The Club appeared 13 times live on Sky TV compared to 9
appearances in 2003/04. Income from Overseas TV deals increased by #1.3m. The TV
merit award was substantially reduced from #5.0m to #0.5m.
* Next season, income from broadcasting will be considerably reduced in
The Coca Cola Championship. The Club will however be able to participate in a
two year parachute payment from The Premier League which is based on 50% of the
Basic TV award and 50% of the Overseas TV distributions.
Matchday income
* Matchday attendances reduced from an average of 31,717 in the 2003/04
season to 30,610 in 2004/05. Attendances were affected by the varied kick off
times and increase in live televised games required under the new broadcasting
contract. Season ticket sales were slightly down on the previous year at 21,300.
Sales for the 2005/06 season are currently approximately 13,500.
* Cup receipts increased from #1.1m to #2.1m. The Club reached the
quarter final of the FA Cup, with victories over Northampton, Portsmouth and
Brentford before losing to the eventual runners up Manchester United.
* Matchday hospitality and catering remained at a similar level to the
previous year with most suites operating at near capacity.
Commercial income
* Commercial income fell by #1.4m to #7.4m. Club merchandising income
fell from #3.5m to #2.2m, the previous season benefiting from a new home kit.
Other commercial income streams such as sponsorship and non-matchday activities
remained at comparable levels with the previous year. The Club hosted its first
ever concert at the stadium in May 2005, Elton John playing in front of 26,000
fans.
Operating costs before player trading
* Operating costs increased by 4% to #43.0m. The main increase was a
#2.2m increase in player and coaching costs. This arose partly due to increases
in player contracts and the costs of changing the football management but
primarily due to an increase in the squad size as five new players and loan
players were signed by Harry Redknapp in the January transfer window, in an
effort to avoid relegation.
* Total wages and salaries increased to #27.8m (2004: #26.3) which
amounts to 62% of turnover (2004: 53%).
* Following relegation, measures have been put in place to reduce the
level of operating costs. These include a reduction in the size of playing squad
following non-renewal of contracts and player sales, 50% reduction in players'
basic wages and a staff redundancy programme.
Player trading
* The net cost of player trading was #2.7m which compares with #2.8m in
the previous year. Six players were added to the squad during the year at a cost
of #8.3m. Since the year end a further five players have been added to the squad
at a cost of #0.4m.
* The #5.6m profit on disposal of players arises from the sale of James
Beattie to Everton, Fitz Hall to Crystal Palace, and Stephen Crainey to Leeds.
Since the year end a further six players have been sold generating transfer
income receivable of #8.2m.
Profit on sale of fixed assets
* The results include a profit of #3.1m arising on completion of the
development and sale of the Club's former stadium, The Dell.
Dividend
* The Directors are proposing a significantly reduced dividend of 0.5p
per share which amounts to #140,000 (2004: 3.0p per share amounting to
#856,000).
Balance sheet
* Fixed assets have reduced from #51.7m to #49.4m. The value of player
registrations reduced from #13.0m to #12.4m and tangible fixed assets reduced
from #37.7m to #36.2m.
* Net debt has increased from #15.9m to #21.1m. The increase in debt is
primarily due to the increased operating loss and reduced level of advance
season tickets sold.
D A Jones
Secretary
1 September 2005
Consolidated Profit and Loss Account
year ended 31 May 2005
Operations
excluding
player Player
trading trading* Total Total
2005 2005 2005 2004
Note #'000 #'000 #'000 #'000
Turnover 1 44,828 - 44,828 49,823
Cost of sales 2 (36,698) (8,292) (44,990) (43,679)
Gross profit/(loss) 2 8,130 (8,292) (162) 6,144
Administrative expenses (6,324) - (6,324) (6,874)
Operating profit/(loss) 3 1,806 (8,292) (6,486) (730)
Profit on disposal of players and manager - 5,602 5,602 6,312
Profit/(loss) before interest and taxation 1,806 (2,690) (884) 5,582
Profit on sale of tangible fixed assets 4 3,094 -
Amounts written off investments 12 - (460)
Net interest payable 5 (1,978) (2,144)
Profit on ordinary activities before taxation 232 2,978
Tax on profit on ordinary activities 8 (159) (1,383)
Profit on ordinary activities after taxation 73 1,595
Equity dividends proposed 9 (140) (856)
Retained (loss)/profit for the financial year 23 (67) 739
Basic earnings per share 10 0.26p 5.60p
Diluted earnings per share 10 0.26p 5.60p
*Player trading represents the amortisation of registrations and the profit or
loss on disposal of registrations.
All amounts derive from continuing activities.
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.
Consolidated and Company Balance Sheets
at 31 May 2005
Group Company
2005 2004 2005 2004
Note #'000 #'000 #'000 #'000
Fixed assets
Intangible assets 11 13,255 14,007 - -
Tangible assets 12 36,164 37,748 2,437 2,521
Investments 13 - - 10,191 10,191
49,419 51,755 12,628 12,712
Current assets
Stocks 14 391 529 - -
Loans 15 120 155 120 155
Debtors 16 6,119 3,086 8,329 7,798
Investments 17 2,480 415 - -
Cash at bank and in hand 2,012 8,770 298 369
11,122 12,955 8,747 8,322
Creditors: amounts falling due within one year 18 (17,219) (21,382) (3,595) (6,525)
Net current (liabilities)/assets (6,097) (8,427) 5,152 1,797
Total assets less current liabilities 43,322 43,328 17,780 14,509
Creditors: amounts falling due after more than 19 (28,947) (29,562) - -
one year
Provisions for liabilities and charges 21 (3,279) (2,403) - -
Net assets 11,096 11,363 17,780 14,509
Capital and reserves
Share capital 22 1,405 1,427 1,405 1,427
Share premium account 23 3,340 3,340 3,340 3,340
Other reserves 23 1,050 1,028 7,560 7,538
Profit and loss account 23 5,301 5,568 5,475 2,204
Equity shareholders' funds 24 11,096 11,363 17,780 14,509
These financial statements were approved by the Board of Directors on 1
September 2005.
Signed on behalf of the Board of Directors.
D A Jones
Director
Group Cash Flow Statement
year ended at 31 May 2005
2005 2004
Note #'000 #'000 #'000 #'000
Net cash (outflow)/ inflow from operating 28a (1,362) 11,835
activities
Returns on investments and servicing of finance
Interest paid (2,175) (2,299)
Interest element of finance lease rental - (10)
Interest received 173 145
Net cash outflow from returns on investments and (2,002) (2,164)
servicing of finance
Capital expenditure and financial investment
Proceeds on sale of tangible fixed assets 3,101 -
Payments to acquire tangible fixed assets (532) (951)
Proceeds on disposal of players' registrations 3,834 6,783
Payments to acquire players' registrations (7,210) (9,940)
Net cash outflow from capital expenditure and (807) (4,108)
financial investment
Acquisitions
Payments to acquire subsidiary undertaking - (294)
Cash acquired within subsidiary - 7
Net cash outflow from acquisitions - (287)
Equity dividends paid (856) (856)
Cash (outflow)/inflow before use of liquid (5,027) 4,420
resources and financing
Management of liquid resources
Purchase of current asset investments (2,065) (415)
Financing
Purchase of own shares (200) -
Repayment of borrowings (534) (528)
Net cash outflow from financing (734) (528)
(Decrease)/increase in cash in the year 28b (7,826) 3,477
Reconciliation of net cash flow to movement in net
debt
(Decrease)/increase in cash in the year (7,826) 3,477
Cash outflow from decrease in debt and lease 28b 534 528
financing
Cash outflow from increase in liquid resources 28b 2,065 415
Change in net debt resulting from cash flows in the (5,227) 4,420
year
Amortisation of finance costs (38) (39)
Movement in net debt in the year (5,265) 4,381
Net debt at 1 June (15,850) (20,231)
Net debt at 31 May 28b (21,115) (15,850)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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