ARE.L Regulatory News (ARE)

6 Mar 2008 07:01

Arena Leisure PLC06 March 2008 ARENA LEISURE PLC PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2007 Arena Leisure Plc ('Arena'), the operator of seven racecourses and 26% of the UK's annual horseracing fixtures, today announces its audited preliminary resultsfor the year ended 31 December 2007. Financial highlights * Revenue increased by 28.0% to £57.9m (2006: £45.3m), principally due to the re-opening of Doncaster Racecourse and the creation of a new catering business.* Profit before interest and tax increased by 6.9% to £6.0m (2006: £5.6m).* Earnings per share increased by 1.2% to 1.63p (2006: 1.61p).* Proposed final dividend of 0.30p per share, giving a total dividend of 0.55p per share - an increase of 7.8% (2006: 0.51p per share). Operating highlights * Wolverhampton Racecourse staged a record 121 fixtures (2006: 111) and Lingfield Park staged 106 fixtures (2006: 95).* Unprecedented wet weather throughout much of the summer caused extensive flooding at Worcester and Southwell Racecourses. As a consequence, Arena was unable to stage 19 scheduled fixtures (2006: 4). Southwell Racecourse recommenced operations in December 2007 following the receipt of insurance proceeds totalling £6.6m.* 347 fixtures held in the year (2006: 353), representing 26% of all UK fixtures.* At The Races delivered an operating profit for the first time - Arena's share of operating profit was £0.2m (2006: loss of £0.3m).* Successful creation of an 'in-house' catering business to direct, manage and operate all catering activities across Arena's racecourses.* Contract signed in January 2008 with Great Leighs to manage its race-day operations. Development highlights * The first phase of the redevelopment of Doncaster Racecourse completed on time for a trial fixture in August and the successful staging of the St Leger festival in September.* Planning permission received for a combined 120-bedroom hotel and 34-unit residential development at Doncaster Racecourse.* Planning permission received for Wolverhampton Racecourse to expand the current hotel to 170-bedrooms and incorporate a casino to create the UK's first 'racino'. Government go-ahead given for the creation of eight 'large' and eight 'small' casinos, with the City of Wolverhampton recommended to receive a 'small' casino licence.* Planning permission received for a 116-bedroom hotel and leisure development at Lingfield Park Racecourse. Commenting on the results, Arena's Chairman, Raymond Mould, said: "Without doubt, 2007 was a very challenging year for Arena. I am delighted that,despite the severe adverse weather experienced during the middle of the year andan unprecedented level of abandoned fixtures, Arena was able to meet revisedmarket expectations with profit before interest and tax of £6.0m. Despite theloss of two racecourses for a significant part of the year, Arena retained itsposition of staging over one-quarter of all horseracing in the UK." "Importantly, Arena made significant progress with each of the strategicallyimportant developments that will yield value in the coming years, in particularwith the re-opening of Doncaster Racecourse, the creation of the cateringbusiness and the receipt of planning permission for hotels at Doncaster,Wolverhampton and Lingfield Park. The Board is optimistic that Arena willcontinue to make good progress in 2008." For further information please contact: Mark Elliott, Chief ExecutiveArena Leisure Plc Tel: 020-7632-2080e-mail: contact@arenaleisureplc.com David Rydell/Olly ScottBell Pottinger Corporate & Financial Tel: 020-7861-3232 www.arenaleisureplc.com Chairman's Statement Without doubt, Arena has had a challenging 2007. I am delighted that, despitethe severe, adverse wet weather experienced during the middle of the year and anunprecedented level of abandoned fixtures, Arena was able to meet revised marketexpectations with profit before interest and tax of £6.0m (2006: £5.6m) and agrowth in earnings per share of 1.2% to 1.63p. Despite the loss of tworacecourses for a significant part of the year, Arena retained its position ofstaging over one-quarter of all horseracing in the UK. Importantly, Arena made significant progress with each of the strategicallyimportant developments that will yield value in the coming years. The first phase of the redevelopment of Doncaster Racecourse concluded onschedule with a trial fixture staged in mid-August and the successful staging ofthe Ladbrokes St Leger festival in September. The second phase involves theconstruction of a 120-bedroom hotel with 34 residential apartments, for whichplanning permission was received during the year. Planning permission was alsofinalised for a development at Lingfield Park Racecourse incorporating a116-bedroom hotel, leisure club, restaurant and bar, golf club house andhospitality boxes. At Wolverhampton Racecourse, planning permission was receivedfor an expansion of the existing hotel from 54 to 170-bedrooms, the constructionof a new conference, exhibition and banqueting suite, a new leisure facilityfeaturing a swimming pool and the incorporation of a casino, thereby creatingthe UK's first 'racino'. In a related development, the Government laid an orderbefore Parliament at the end of February 2008 that confirmed the City ofWolverhampton as the intended recipient of one of the new 'small' casinolicences. Arena hopes that Wolverhampton Racecourse will subsequently be chosenas the site for the new casino. Given the scale of developments now in thepipeline for 2008/9, the Board decided to defer consideration of any majorenhancements at Royal Windsor Racecourse for at least one year. It also decidedto write-down the carrying value of related development costs incurred in prioryears by £1.05m. Credit Committee approval has been received from Arena's relationship bank toprovide new banking facilities to undertake the first two of the hotel projects.The Board is confident that funding will be available for the Wolverhamptondevelopment once it is confirmed that the 'racino' project will proceed. In March 2007, Arena created its own catering business and took over theoperation of all food and beverage activities at six of its racecourses.Operations at the seventh track, Worcester, commenced at the beginning of March2008. The set-up costs of the catering operation in 2007, which were exacerbatedby start-up costs incurred on the re-opening of Doncaster Racecourse, amountedto around £0.4m in 2007. The business is progressing on track and is expected toincrease the long-term profitability of Arena's racecourse operations. In January 2008, Arena signed an initial one-year contract to oversee themanagement of racing operations at the new Great Leighs Racecourse at Chelmsfordin Essex. This arrangement reflects Arena's status as the clear market leader inall-weather racing in the UK and is expected to generate the Group a profit ofaround £0.25m. Trading in the important summer months was impacted by severe wet weatherconditions which culminated in unprecedented and extensive flooding at bothSouthwell and Worcester Racecourses. As a consequence, Arena was unable to stage19 scheduled fixtures in 2007 (2006: 4). Equally significant was the severereduction in anticipated attendance levels at many of the high profile summerfixtures that were held across the Group, notwithstanding the weather. However,once conditions improved later in the summer, Royal Windsor Racecourse was ableto break its attendance record with one crowd of over 10,000 people. An insurance settlement of £6.6m was negotiated following the closure ofSouthwell Racecourse due to the effects of severe flooding. This sum covered thefinancial impact of both business interruption and the physical repair andreplacement of assets; the latter resulting in a gain of £1.35m due to the'new-for-old' nature of the policy. The settlement allowed an acceleratedrefurbishment programme and the re-opening of the Racecourse in mid-December. Noinsurance claim was possible in respect of the flooding at Worcester. Revenue increased by 28.0% to £57.9m (2006: £45.3m), largely driven by thecreation of the new catering business and the re-opening of DoncasterRacecourse. Profit before interest and tax for 2007 was £6.0m, in line withrevised market expectations (2006: £5.6m). This includes a one-off net profit of£0.3m arising from the gain on the damaged assets element of the insurancesettlement at Southwell Racecourse, net of the partial write-down of the RoyalWindsor development costs. Profit before tax remained stable at £5.8m (2006:£5.8m) and earnings per share increased by 1.2% to 1.63p (2006: 1.61p). The racecourse operations performed admirably, responding extremely well to verydifficult trading conditions during the middle part of the year, and deliveredan operating profit of £8.4m (2006: £8.7m). Total attendances at 573,000 wereup 12.4% (2006: 510,000). This growth was aided by the re-opening of DoncasterRacecourse, offset to a large extent by flooding-related closures at Southwelland Worcester. Attendances for the UK racing industry as a whole were down by1.0% at 5.8 million. Importantly, Arena's number of private hospitalitycustomers, who provide the highest spend per head, grew by 30.1% to 62,700(2006: 48,200). At The Races ('ATR'), which is 47.5% owned by Arena, progressed well. Arena'sshare of ATR's maiden operating profit was £0.2m (2006: loss of £0.3m). Arena'sshare of ATR's post tax result was a loss of £0.2m (2006: loss of £0.8m). As a reflection of the Board's confidence for the future, an interim dividend of0.25p per share was paid in October and the Board has proposed a final dividendfor 2007 of 0.30p per share (2006: 0.26p). This will give a total dividend inrelation to 2007 of 0.55p per share - an increase of 7.8% over the 0.51p pershare declared for 2006. This dividend is proposed to be paid on 2 May 2008 toshareholders on the register on 4 April 2008. The dedication and hard work demonstrated by Arena's employees over the last12-months has been tremendous and I am extremely grateful to them all. Theirpassion for this Company and its customers is fundamental to the future successof Arena. Outlook Despite the weather-related challenges that arose in 2007, the Group achievedmany of its objectives. With Doncaster Racecourse successfully re-opened andlooking forward to a full year of operations, Southwell and WorcesterRacecourses restored following the summer flood damage and planning permissionreceived for the major hotel-based developments, the Board is optimistic thatArena will continue to make good progress in 2008. Raymond MouldChairman5 March 2008 Chief Executive's statement and review of operations Whilst 2007 was a difficult year, particularly in terms of profitability as aresult of exceptionally wet weather during the important summer months, Arenamade strong progress. It was a year in which the staff responded magnificentlyand, in many ways, was a successful year, particularly with regard to theprogress made with the business' exciting growth opportunities and the deliveryof profit before interest and tax ahead of last year. Throughout 2007, Arena owned and operated seven racecourses at Royal Windsor,Lingfield Park, Wolverhampton, Southwell, Folkestone, Worcester and Doncaster.The last of these, Doncaster, was closed for the majority of the year as itunderwent a major redevelopment. It successfully re-opened in August and stagedthe Ladbrokes St Leger festival in September. Southwell and Worcester were bothbadly affected by flooding in the summer. In total, Arena's seven courses staged26% of all horseracing in the UK in 2007. Arena's joint venture company, At TheRaces, delivered an operating profit for the first time. Significant value will be generated from Arena's racecourse assets as the Groupinvests in new or expanded profit generating opportunities that complementexisting activities. Progress was made in this area with the re-opening of theredeveloped Doncaster Racecourse and the creation of an 'in-house' cateringbusiness to service all of Arena's racecourses. Planning permission was alsoreceived for three major developments: a hotel and residential development atDoncaster, a hotel, leisure and residential development at Lingfield Park and ahotel and casino development at Wolverhampton Racecourse. Review of operations Arena's racecourses achieved an operating profit in 2007 of £8.4m (2006: £8.7m).In what was otherwise a year of strong underlying performances, the start-upcosts incurred in 2007 associated with the new Doncaster Racecourse and cateringbusinesses and the impact of heavy rainfall during much of the summer combinedto reduce operating profit below last year and, in particular, below ourexpectations. Revenue grew by 28.0% to £57.9m (2006: £45.3m) principally from the creation ofArena's new catering business which took over the majority of Arena's food andbeverage contracts in April. The full revenue from the catering activities isincluded for the last nine months of the year, compared to a commission receiptfor both the first three months of 2007 and the whole of 2006. This additionalrevenue amounted to around £7.4m. The re-opening of Doncaster Racecourse inAugust 2007 also had a net positive effect on revenue. During Doncaster'sredevelopment, most of the corresponding fixtures in 2006 had been stagedelsewhere in the Arena racecourse portfolio, although generally in front ofsmaller crowds, and with the St Leger festival staged outside the Group at York. Doncaster Racecourse is one of the UK's major racecourses, hosting the openingrace of the flat racing season as well as the last classic race of the season -the 230-year old St Leger. The Racecourse closed for redevelopment in January2006 and re-opened for a trial event in mid-August 2007. It then staged thefour-day Ladbrokes St Leger festival in mid-September as scheduled, with HRH thePrincess Royal performing the official opening. Attendances across the four daysexceeded expectations, with a modern day record of 31,000 attending theLadbrokes St Leger, which bodes well for the future. Having taken 'delivery' ofthe new building only a short period before both the August fixture and theSeptember fixture, Arena incurred some significant one-off costs which, whencombined with the start-up costs incurred in establishing the new business,resulted in Doncaster Racecourse generating a loss in 2007 of £0.5m (2006: lossof £0.1m). The performance since its re-opening gives re-assurance that it willoperate in line with expectations and generate an increasing level of operatingprofit. 'Snagging' works are still being undertaken by the building contractorand the final cost is subject to final account; thus the total cost for theredevelopment remains an estimate at £34.9m. Arena has an 81% stake in thecompany that operates the Racecourse via a 99-year lease, with the local councilowning the remaining 19%. For the first 30 years of operation, Arena willreceive 92.5% of profits, with the council receiving the balance. Arena's new catering business successfully launched in April 2007, taking overthe catering activities at six of the Group's racecourses. On 1 March 2008, italso took over the catering operations at the seventh racecourse, Worcester.Catering is a fundamental part of the racecourse experience, becoming a centralaspect of a successful and enjoyable day at the races. The Board decided thatonly a dedicated in-house operation could provide the passion, innovation andexcellence that it demands for its customers. It recruited an enthusiastic andexperienced central catering management team that relishes the opportunity thathas been created; building a catering business whose objectives are perfectlyaligned with those of the venues it serves, namely customer satisfaction and thegeneration of profitable growth. The transfer from the external caterer wassuccessful and the new business has performed well, having a positive impact onthe customer experience. The business will work with the racecourses to furtherimprove the food and beverage offering, thereby increasing repeat business andspend per head, with a consequent increase in bottom line profitability. Thecosts incurred in setting up the new business include start-up costs arising onthe re-opening of Doncaster Racecourse and amount to around £0.4m in 2007. Together, the catering and Doncaster Racecourse businesses contributed a one-offloss in 2007 of £0.9m (2006: £0.1m). Without these costs, which were incurredfor the long-term benefit of the Group, the operating profit from Arena'sracecourses would have grown in 2007 by 5.7% to £9.3m (2006: £8.8m). The second major impact on profitability was the severe adverse weatherthroughout much of the summer that culminated in the flooding of both Southwelland Worcester Racecourses. Worcester Racecourse is within a flood plain of the River Severn and oftenfloods during the winter months, but extremely rarely during its summer racingseason. In the period to June 2007, eight fixtures were staged before theRacecourse flooded and the remainder of the season was lost. The eight fixturesstaged in 2007 compare to the 21 staged in 2006. Four of the abandoned fixtureswere transferred elsewhere in the Group but the remainder were lost. The loss offixtures is unusual and arose largely due to the turf course at Southwell alsobeing under water at the same time. Whilst none of the buildings were severelydamaged, there was a significant financial impact as the Racecourse, due to itslocation, does not have business interruption insurance. As a consequence, theRacecourse generated a loss of £0.4m, compared to a marginal profit in 2006. Thetrack is now in good condition and Arena looks forward to a successful 2008summer jumping season at Worcester commencing on 6 April. Southwell Racecourse has not flooded in living memory. However, storms in Juneresulted in all buildings at the Racecourse, certain areas of both theall-weather and turf courses and the golf course flooding. The damage caused tomany of the buildings was severe and, with some impact on the upper levels ofthe all-weather track surface, the Racecourse was unable to operate. Theinsurance policy provided compensation for both business interruption and fordamaged buildings and equipment to be repaired and/or replaced. A negotiatedsettlement was reached with the insurers for a sum of £6.6m and the Racecoursere-opened in mid-December. The settlement covered the financial impact of bothbusiness interruption and the physical repair and replacement of assets. Thelatter contributed to a net gain of £1.35m due to the 'new-for-old' nature ofthe policy. Taking into account the business interruption element within theinsurance settlement, Southwell Racecourse traded in line with originalexpectations in 2007. Some repair work is still ongoing, particularly to thecatering facilities, and, consequently, there is an element of the businessinterruption insurance settlement that has been deferred and will be recognisedin 2008. The Racecourse is expected to be fully operational by the end of April2008. At Royal Windsor Racecourse, after a positive first half of the year in whichaverage attendances had increased by around 20%, the third quarter of the yearwas particularly weather impacted. One fixture was lost to a waterlogged surfaceand, on a number of the usually popular Monday evenings, the wet weather causedsignificant reductions in attendance levels. As such, whilst Royal Windsor onlylost one fixture, it was affected by generally reduced attendance levels and,consequently, profits in 2007 fell slightly below those generated in 2006. Oncemore settled weather returned, it was very pleasing that on a Saturday in AugustRoyal Windsor Racecourse broke the record for its highest attendance with acrowd of just over 10,000. Early sales levels for the forthcoming season whichcommences on 14 April are encouraging. At each of Wolverhampton, Lingfield Park and Folkestone Racecourses the adverseweather also had an impact. At both Wolverhampton and Lingfield Park, theproportion of advance on-line customer bookings was increased with a view toincreasing cash flow, ensuring customer attendance and gaining valuablemarketing data. This initiative was encouraged by offering significant pricereductions to on-line bookings and generated a great deal of valuable customerinformation that has made possible highly targeted internet-based marketingcampaigns although, in the short term, this may have held back on-the-gateattendance figures early in the year. New ticket pricing strategies and newmarketing initiatives were introduced at both courses to encourage a greaternumber and frequency of visits. At Lingfield Park, a series of Saturday nightpost-racing concerts were held, although a large proportion of these wereunfortunately affected by wet weather. A similar series of concerts will bestaged in 2008 as an added attraction on a Saturday evening. The various costs and shortfalls in income were mitigated to some extent by anew five year agreement with 'BAGS' that commenced on 1 January 2007 for thesupply of Arena's live horseracing pictures to Britain's licensed betting shops.This new contract generated around £9.9m (2006: £8.8m). The introduction of an integrated ticketing and admission system commenced withits successful installation at Doncaster and Royal Windsor. The roll-out to theremaining racecourses in the Group will continue during 2008. The new systemensures that admissions procedures are standardised and tightened and that agreater level of information on Arena's customers is captured for marketingpurposes. Attendances and fixtures Arena's racecourses stage fixtures throughout the year. The fixtures in June andJuly attract the largest crowds and, in 2007, these two months were forecast toaccount for around 28% of annual attendance-related income. The poor weather inthese key months impacted the anticipated attendances across all Arena'scourses. Race-day attendances showed a 12.4% increase to 573,000 (2006: 510,000).Attendances for the UK racing industry as a whole were down by 1.0% at 5.8million. Arena's increase resulted from the re-opening of Doncaster Racecoursein August, with attendances of 102,000 achieved at the nine fixtures staged inthe year. In 2008, its first full year of operation, Doncaster Racecourse isexpected to attract race-day crowds totalling around 250,000 and to reduce theproportional importance of June and July due to its relatively large crowdsthroughout the year, particularly with the St Leger festival in September. Excluding Doncaster, attendances at Arena's six other courses fell 7.7% to471,000 (2006: 510,000); a reduction that is more than accounted for by thecombined 48,000 year-on-year shortfall caused by flooding-related closures atSouthwell and Worcester. If Southwell and Worcester are also excluded,attendances grew by 2.3% to 398,000 (2006: 389,000), which compares favourablywith the racing industry as a whole (down 2.0% on the same basis). Totalattendances grew at Folkestone, Wolverhampton and Lingfield Park, in part due toadditional fixtures being staged at each course. At all three, the averageattendance per fixture declined very slightly due to the greater frequency ofracing. Despite the underlying growth on 2006, the attendance figures fell shortof both expectations and where management had positioned the cost base of thebusiness, directly impacting profitability. The number of private hospitality customers grew by 30.1% to 62,700 (2006:48,200), helped by the re-opening of Doncaster and small levels of growth atRoyal Windsor, Wolverhampton and Lingfield Park, offset by the closures ofWorcester and Southwell. This underlying growth reflects Arena's focus on thisimportant customer base; one that generates the highest spend per head andtypically pays in advance, thereby guaranteeing attendance regardless of theweather, but also offers a market that Arena believes has strong growthpotential. The increased attendances were achieved from 347 fixtures (2006: 353). Thesefixtures represented 26% of the UK horse racing fixture list (2006: 26%). Thereduction in fixtures staged arose from an unprecedented level of lost fixtures(2007: 19; 2006: 4), primarily due to weather-related abandonments. Of thefixtures staged, 36 were obtained due to the delayed opening of the newracecourse at Great Leighs (2006: 19) and 22 were internal transfers from thetwo flooded courses. These fixtures were all transferred and staged atrelatively short notice which is not ideal for generating large attendances.Wolverhampton Racecourse, with its floodlit all-weather surface, staged overone-third of all Group fixtures at 121 (2006: 111) and Lingfield Park, with itsall-weather and turf courses, staged 106 fixtures (2006: 95). The significantincrease in short-notice fixtures contributed to the reductions at both coursesin average attendance in 2007. In addition, in the last quarter of the year,around 17 new evening fixtures were staged under floodlights at Wolverhamptonfollowing the legalisation of the evening opening of betting shops during thewinter months. We are optimistic that a substantially greater level ofattendances at these fixtures can be generated over time. It is also notablethat in the periods of increased racing frequency, there are more races run withfields of less than eight runners, which reduces the amount received from BAGSfor those races. Consequently, whilst the additional fixtures proved profitable,they have had the effect of reducing average race profitability. In 2008, Arena is currently scheduled to stage 370 fixtures, again representingaround 26% of the UK horse racing fixture list. This includes 17 fixturestransferred from Great Leighs that are not expected to be repeated in 2009 and85 fixtures acquired in the British Horseracing Authority ('BHA') fixturebidding process (2007: 66), of which 18 are additional new floodlit winterevening fixtures in the first quarter. In 2009, the number of fixtures iscurrently expected to be around 354, assuming a similar number of acquired BHAfixtures. Racing industry developments In December 2006, the Government announced the extension of the Levy until suchtime as a secure and adequate alternative commercial funding arrangement couldbe identified. The Levy is the major source of funding for the UK racingindustry. In 2007, Arena received £19.4m from the Levy (2006: £19.1m),representing 33.5% of Arena's revenue (2006: 42.2%), the majority of which fundsprize money payments. In October 2007, no agreement was reached on the fundinglevel for the year 2008/9. In February 2008, the Department of Culture Media andSport announced a continuation of the funding at the same level as for 2007/8i.e. a 10% charge on gross profits. The announcement highlighted the need forracing and the betting industry to move away from an adversarial approach and toengage in a modernisation of the Levy process. Modernisation is a centralelement in improving the dialogue between the racing and betting industrieswithin the Levy Board. In subsequent speeches, the Sports Minister hasreiterated that the Levy will remain in place until such time as both partiescan agree on an appropriate alternative. The BHA came into existence in July 2007, combining racing's regulatory andgovernance functions. Ian Renton, Arena's Racing Director, is a member of theBHA board, nominated by the UK's racecourses. Racing Enterprises Limited wasalso established as the industry's commercial entity, jointly owned by the UKracecourses and the Horsemen's Group. The Gambling Act 2005 came into effect in September 2007 enabling the previouslymentioned evening opening of betting shops. It also removes the 'five-timesrule' which states that bookmakers can only be charged five-times the admissionprice for the section of the racecourse in which they operate. As a result, from2012, racecourses will be able to enter into direct commercial arrangements withthe on-course bookmakers. The Government has recently rejected a bid by a consortium of racing interestsfor the privatisation of the Horserace Totalisator Board (the 'Tote'), whichowns 540 betting shops and has the exclusive licence to run pool betting onhorseracing in the UK. The Government now intends to prepare for an open marketsale and will appoint advisers to advise it on its strategic options. TheGovernment confirmed its intention to make available to racing half the netproceeds of any open market sale in the event that a sale to racing itself didnot prove possible and is considering how best to give effect to thatundertaking in ways which meet the needs of racing, do not add unnecessarybureaucracy and are consistent with European state aid and competitionregulations. At The Races ('ATR') The media rights value of the races staged at Arena's courses is deliveredthrough ATR, a joint venture in which Arena and BSkyB both have a 47.5% stake.ATR has media rights arrangements in place with 30 UK racecourses, providing itwith the exclusive right to broadcast nearly 60% of all UK fixtures onnon-terrestrial television and other platforms. ATR also has exclusive rights tobroadcast racing from all 27 Irish racecourses and consequently broadcasts morethan 1,100 UK and Irish meetings each year. It maximises the value of the mediarights licensed to it by making its racing product as widely available aspossible, both domestically and internationally and has commercial agreements inplace with all of the UK's major bookmaking companies. It generates revenuethrough both the facilitation of bets placed with its betting partners and thedriving of ancillary revenues, such as sponsorship and advertising. ATR continued to make good progress in 2007 and its relationship with the Irishracing industry was strengthened further. ATR had the exclusive rights tobroadcast racing from all 27 Irish racecourses through to the end of 2008 and,through its arrangements with SIS, these rights have now been extended for theperiod 2009 to 2013. This was an important 'win' for ATR, ensuring long-termaccess to a very important content source and reflecting the strength of the ATRproposition to the owners of racing media rights. In 2007, ATR's revenue rose by 8.2% to £14.5m (2006: £13.4m) and it delivered anoperating profit for the first time. This growth in revenue occurred across allthe major areas of international distribution, sponsorship and advertising. There-opening of Doncaster Racecourse and ATR's access to all of its racing was animportant step forward. Arena's share of ATR's operating profit was £0.2m (2006: loss of £0.3m). Thisimprovement arose from increased revenue and reduced costs of someinfrastructure contracts. ATR's operating profit, combined with a small residualcost from litigation that ended in 2006, interest on shareholder loans and asmall amount of tax payable on some overseas income resulted in Arena's share ofATR's loss after tax improving by 75% to £0.2m (2006: £0.8m). During 2007, the ATR television channel remained the UK and Ireland's mostwatched, dedicated horseracing channel, regularly attracting over 1.5 milliondifferent individuals every month (2006: 1.45 million) and with channel ratingsand reach at record levels. Importantly, these customers have been watching forlonger and at more lucrative times, helping to drive advertising revenues. Thelatter is attributable to ATR's focus on maximising the number of ad breaks andensuring their positioning as close to race 'off times' as possible, therebyencouraging viewers to stay through the ad breaks, helping to increaseadvertising revenues. ATR's website, attheraces.com, has grown to be the number one horseracing andbetting website in the UK and Ireland with over 500,000 unique monthly users(2006: 400,000), making it also one of the UK's most visited sports bettingwebsites. ATR made good progress in 2007 and, from its strong financial and operationalposition, this progress is expected to continue in 2008, resulting in furthergrowth in profitability. Racecourse developments Significant progress was made with Arena's major new or expanded profit generating opportunities. The first of these came to fruition with the re-opening of Doncaster Racecourse and the creation of the catering business. The remaining three projects were all dependent on the receipt of planning permission and in 2007 success was achieved with all three. In the second phase of Doncaster's redevelopment, planning permission wasreceived for a combined 120-bedroom four-star hotel with associated restaurantand bar areas on the lower floors and 34 residential apartments on the upperfloors. Negotiations over the terms of a fixed price contract are ongoing inorder to ensure that the project is delivered within Arena's cost requirements.It is hoped that the project will commence in the middle of 2008 and complete bythe end of 2009. The hotel is expected to operate as a Copthorne hotel, with amanagement agreement close to being signed with Millennium & Copthorne. Thehotel will operate closely with the extensive new facilities on the Racecourse,for the benefit of both, and will play an integral role in helping to transformDoncaster Racecourse into a world-class leisure, business and racing venue. Theestimated net cost of the project is £12.0m. At Lingfield Park, detailed permission was received in 2006 for the conversionof a leisure club into 22 residential apartments, together with the provision ofa further three houses within its grounds. Outline planning permission was alsoreceived for significant improvements to the Racecourse itself and, in November2007, detailed planning permission was received. A total of 22 buildings will bedemolished, to be replaced by a new integrated leisure building incorporating a116-bedroom hotel, a new golf club house, restaurants and bars and extensive newleisure facilities including a leisure club with a swimming pool, as well asimprovements to the racing facilities. Negotiations for the fixed price contractare progressing well and a franchise agreement with Marriott is expected to besigned soon. It is expected that the development will commence in the next fewmonths and complete by the end of 2009. The estimated net cost of the tworelated developments is in the region of £26.0m. The Board is exploring theoption of selling the existing leisure club site with its associated planningpermission and thereby reducing both the initial gross outflow and the riskassociated with the additional construction and subsequent sale of theresidential development. At Wolverhampton Racecourse, planning permission was received for an expansionof the existing hotel from 54 to 170-bedrooms, the construction of a newconference, exhibition and banqueting suite, a new leisure facility featuring aswimming pool and the incorporation of a casino, thereby creating the UK's first'racino'. The proposed expansion will help secure the long-term future of theRacecourse and will further enhance its status as a leading racing, conferencingand leisure destination for the West Midlands region. In conjunction with thechange in the catering provision to Arena's in-house team, an extensiverefurbishment of the Racecourse's 370-seat grandstand viewing restaurant,Horizons, was successfully undertaken, with both changes helping to improve thecustomer experience. Running alongside this planning process is the City of Wolverhampton's desire toreceive one of the proposed new casino licences. The City was recommended as alocation for a 'small' casino by the Casino Advisory Panel in January 2007, withWolverhampton Racecourse playing a prominent role in the City's application.Arena's proposed racino is capable of accommodating such a 'small' casino. ThePanel commented that: "Wolverhampton well satisfies all of our criteria and ifthe casino happens to end up at the racecourse it would add to its uniquenessand provide an interesting and unusual social impact test". The Panel'srecommendations require the endorsement of Parliament and, in February 2008, theGovernment laid an order before Parliament that confirmed the City ofWolverhampton as the intended recipient of one of the new 'small' casinolicences. Should a small casino licence be confirmed for the City ofWolverhampton, Arena will partner with an experienced casino operator and hopesthat Wolverhampton Racecourse will be chosen as the best site in the City forthe casino. The integrated nature of the proposal, together with the jobs thatwould be both safeguarded and indeed created, would make a casino atWolverhampton Racecourse a very exciting addition to the City. The cost of thedevelopment is estimated at £25.0m and will generate up to 280 additional jobsonce fully operational. It currently looks as though this project is unlikely tocommence before the start of 2009. The Board continued to review the development opportunity at Royal WindsorRacecourse. As a result of the planning successes and the consequent scale ofdevelopments expected to be undertaken in 2008/9, the Board has deferred furtherconsideration of any major enhancements at Royal Windsor Racecourse for at leastone year. It also decided to write-down the carrying value of relateddevelopment costs incurred in prior years by £1.05m. Arena expects to conclude the documentation with its relationship bank withinthe next few weeks on a further £38.5m of banking facilities. This bringsArena's total facilities to £78.0m which allows Arena to undertake the Doncasterand Lingfield Park hotel projects. The Board is confident that further fundingwill be available for the Wolverhampton development once it is confirmed thatthe 'racino' project will proceed. In January 2008, Arena signed an initial one-year contract to manage the racingoperations at the new Great Leighs Racecourse in Essex. Arena will workalongside the Racecourse's management team and bring its world-class expertisein the management of all-weather tracks to assist Great Leighs with theapproximate 80-days racing it is set to stage each year. This arrangement isexpected to net the Group a profit of around £0.25m in 2008.Arena is also seeking to realise value from any surplus or under-utilised land assets within its extensive portfolio of freehold properties, with particular focus on surplus land at Folkestone and Lingfield Park Racecourses. In January 2008, Folkestone Racecourse's local planning authority commenced consultation on the new Local Development Framework. Arena has made a submission in which a bright future for the Racecourse is portrayed, but only in conjunction with a residential development on a major element of the approximate 50-acres of surplus land within the Racecourse. The Channel Corridor Partnership ('the Partnership') - a multi-agency body focused on the area around the Racecourse - is attempting to achieve the designation of the adjacent train station as a parkway stopping station on the new high-speed route from St Pancras to Folkestone. The Partnership is expected to issue its report later in March 2008. It is likely that the benefits of a redevelopment of the Racecourse and the unlocking of value from the surplus land, if any, will beseen in the medium to longer term. At Lingfield Park, a review of the approximate 125-acres of surplus land will commence shortly with a view to determining the potential long-term development opportunities.Arena is in good shape to continue to deliver increasing shareholder value fromthe Group's extensive asset base. Mark ElliottChief Executive5 March 2008 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007 Separately disclosed 2007 2006 Trading items Total Total Notes £'000 £'000 £'000 £'000 --------------------------------------- Revenue 2 57,920 - 57,920 45,259Cost of sales (42,024) - (42,024) (30,033) ---------------------------------------Gross profit 15,896 - 15,896 15,226Other operating income 8 1,352 - 1,352 133Administrative costs excludingimpairment losses (11,351) - (11,351) (9,031)Impairment losses - (1,050) (1,050) - ---------------------------------------Profit from operations 2 5,897 (1,050) 4,847 6,328Non-operating income and expense 2, 8 - 1,370 1,370 -Share of post tax results of joint venture 2 (215) - (215) (812)Reversal of provision againstinvestment in associate 2 - - - 100 ---------------------------------------Profit before interest and taxation 5,682 320 6,002 5,616 --------------------------------------- Finance expense (2,053) - (2,053) (848)Finance income 1,895 - 1,895 1,049Net finance (expense)/income 2 (158) - (158) 201 ---------------------------------------Profit before taxation 2 5,524 320 5,844 5,817Income tax expense 3 - - - - ---------------------------------------Profit for the year 5,524 320 5,844 5,817 ---------------------------------------Attributable to: - Equity shareholders of the parent company 5,615 320 5,935 5,850- Minority interest (91) - (91) (33) ------------------------------------- Profit for the year 5,524 320 5,844 5,817 -------------------------------------- Earnings per share 4 Pence Pence -------------------------------------- Basic earnings per share 1.63 1.61Diluted earnings per share 1.63 1.60 -------------------------------------- Consolidated Statement of Changes inShareholders' Equity 2007 2006 £'000 £'000 ------------------Profit for the period 5,844 5,817Share-based payment expense 153 34Exercise of employee share options - 287Minority interest equitycontribution 6 2,000 -Dividends paid 5 (1,858) (1,639) ------------------ 6,139 4,499Total equity at the beginning of the period 64,272 59,773 ------------------Total equity at the end of the period 70,411 64,272 ------------------Attributable to:- Equity shareholders of the parent company 68,535 64,305- Minority interest 6 1,876 (33) ------------------ 70,411 64,272 CONSOLIDATED BALANCE SHEETAT 31 DECEMBER 2007 2007 2006 Notes £'000 £'000 -------------------------- Non-current assets Property, plant and equipment 108,283 86,054 Intangible assets 5,596 5,596 Investment in joint venture: Share of gross assets 2,624 1,770 Share of gross liabilities (6,437) (5,368) (3,813) (3,598) Goodwill in respect of joint venture 1,580 1,580 Loans to joint venture 4,979 3,976 2,746 1,958 Investment in associate - 100 --------------------------Total non-current assets 116,625 93,708 Current assets Inventories 415 17 Trade and other receivables 6,191 6,454 Other financial assets - 58 Cash and cash equivalents 3,735 50 --------------------------Total current assets 10,341 6,579 --------------------------Total assets 126,966 100,287 -------------------------- Current liabilities Bank overdraft - (2,920) Trade and other payables (6,475) (7,187) Loans and borrowings (2,796) (135) Accruals and deferred income (6,585) (4,477) --------------------------Total current liabilities (15,856) (14,719) --------------------------Non-current liabilities Loans and borrowings (37,145) (18,641) Accruals and deferred income (3,554) (2,655) Total non-current liabilities (40,699) (21,296) --------------------------Total liabilities (56,555) (36,015) --------------------------Total net assets 70,411 64,272 --------------------------Equity Share capital 18,210 18,210 Share premium 6223 223 Merger reserve 65,417 5,417 Retained earnings 644,685 40,455 -------------------------- Equity attributable to shareholders of the parent company 68,535 64,305 Minority interest 61,876 (33) -------------------------- Total equity 70,411 64,272 -------------------------- CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 Notes £'000 £'000 ---------------------- Cash flows from operating activitiesProfit for the year 5,844 5,817Adjustments for:Depreciation 2,616 2,051Insurance surplus in respect of Southwell flood 2 (1,370) -damaged assets 1,050 -Impairment provisionShare-based payment expense 153 34Net finance expense/(income) 158 (201)Share of loss of joint venture 215 812Reversal of provision against investment in associate - (100)Profit on sale of property, plant and equipment (4) (14)Grant amortisation (53) (53) ----------------------Cash flows from operating activities beforechanges in working capital and provisions 8,609 8,346Decrease/(increase) in trade and other receivables 263 (1,165)(Increase)/decrease in inventories (398) 2Decrease in trade and other payable (125) (1,463) -----------------------Net cash from operating activities 8,349 5,720 ----------------------- Cash flows from investing activitiesPurchases of property, plant and equipment (27,250) (14,505)Proceeds from sale of property, plant and equipment 66 144Insurance proceeds in respect of flood damaged assets 4,586 -Sale of investment in Trackplay LLC 100 -Loans to joint venture (1,003) (692)Interest received 962 353 -----------------------Net cash used in investing activities (22,539) (14,700) ----------------------- Cash flows from financing activitiesProceeds from issue of ordinary share capital - 287 Minority interest equity contribution 6 2,000 -Proceeds from bank and other borrowings 21,687 11,812 Capital grant received 882 -Repayment of loans (143) (302)Repayment of finance lease liabilities (2) (2)Interest paid (1,771) (848)Dividends paid 5 (1,858) (1,639) -----------------------Net cash from financing activities 20,795 9,308 ----------------------- Increase in cash and cash equivalents 6,605 328Net cash and cash equivalents at beginning of year (2,870) (3,198)Net cash and cash equivalents at end of year 7 3,735 (2,870) ----------------------- Notes to the accounts 1. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 2006 but is derived from those accounts. Statutory accounts for 2006 have been delivered to the registrar of companies, and those for 2007 will be delivered in due course.The auditors have reported on those accounts; their report was (i) unqualified,(ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report and (iii) did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. 2. Additional profit disclosure Revenue Profit/(loss) --------------------------------- 2007 2006 2007 2006 £'000 £'000 £'000 £'000 --------------------------------- Racecourse operations 57,920 45,259 8,358 8,701 Central costs - - (2,461) (2,506) --------------------------------- Revenue and profit from operations before one-off operating items 57,920 45,259 5,897 6,195 --------------------------------- One-off operating items: Other operating income --- release of unclaimed share proceeds on purchase of subsidiary undertaking - 133 Impairment losses - Royal Windsor (1,050) - --------------------------------- Racecourse Profit from operations 4,847 6,328 Non-operating income and expense: Insurance proceeds received in respect of Southwell Racecourse material damage claim 4,586 - Assets written off in respect of Southwell Racecourse flood (3,216) - --------------------------------- 1,370 - Share of post tax results of At The Races: Operations 166 (269) Finance costs (284) (158) Exceptional items (84) (434) Tax (charge)/credit (13) 49 --------------------------------- (215) (812) Reversal of provision against investment in associate - 100 --------------------------------- Profit before interest and taxation 6,002 5,616 --------------------------------- Net finance (expense)/income: Interest payable (1,771) (848) Interest receivable 962 353 Gain on present value of interest free loans on initial recognition 933 638 Amortisation of previous gain on present value of interest free loans (223) - (Losses)/gains on derivatives used to manage fair value interest rate risk (59) 58 -------------------------------- (158) 201 -------------------------------- Profit before taxation 5,844 5,817 Income tax expense - - -------------------------------- Profit for the year 5,844 5,817 -------------------------------- Profits and losses from operations are stated before any intra-group managementcharges. Central costs consist principally of expenditure incurred in respect ofthe management, control and administration of the Group. 3. Taxation There is no current year tax charge (2006: no tax charge) mainly due to theutilisation of Horserace Betting Levy Board capital credits which are notassessable to tax. At 31 December 2007, corporation tax losses representingtrading and non-trading losses of £58,538,000 (2006: £57,148,000) were availablefor utilisation in future years subject to agreement with HM Revenue & Customs. 4. Earnings per share Earnings 2007 2006 £'000 £'000 ---------------------------- Profit for the year attributable to equity holders 5,935 5,850 ----------------------------of the parent companyWeighted average number of shares 2007 2006 No.'m No.'m ---------------------------- Weighted average number of shares used in thecalculation of basic EPS 364.2 364.1Dilutive potential of ordinary shares:Employee share options 0.3 1.0 -----------------------------Weighted average number of shares used in thecalculation of diluted EPS 364.5 365.1 ----------------------------- Certain employee options have not been included in the calculation of dilutedEPS because their exercise is contingent on the satisfaction of specificcriteria that had not been met at the end of the year. In addition, certainemployee options have also been excluded from the calculation of diluted EPS astheir exercise price is greater than the weighted average share price during theyear (i.e. they are out-of-the-money) and therefore would not be dilutive. Thetotal number of share options excluded in 2007 was 5.52 million (2006: 7.25million). 5. Dividends 2007 2006 £'000 £'000 -------------------------- Final dividend of 0.26 pence (2006: 0.2 pence) perordinary shareproposed and paid during the year relating to the previous year's results 947 728 -------------------------- Interim dividend of 0.25 pence (2006: 0.25 pence)per ordinary sharepaid during the year relating to the current year's results 911 911 --------------------------Dividends paid in the year 1,858 1,639 -------------------------- The directors have proposed a final dividend of 0.30 pence (2006: 0.26 pence)per share totalling £1,093,000 (2006: £947,000) to be paid on 2 May 2008 toshareholders on registered on 4 April 2008. In accordance with IAS 10, thisdividend has not been accrued at the balance sheet date. 6. Reserves Share premium Merger Retained Minority account reserve earnings interest £'000 £'000 £'000 £'000 ------------------------------------------------- At 1 January 2006 46 5,417 36,210 - Exercise of employee share options 177 - - - Profit for the year - - 5,850 (33) Dividends paid - - (1,639) - Share-based payment expense - - 34 - ------------------------------------------------- At 31 December 2006 223 5,417 40,455 (33)Profit for the year - - 5,935 (91)Minority interest equity contribution - - - 2,000Dividends paid - - (1,858) -Share-based payment expense - - 153 - -------------------------------------------------At 31 December 2007 223 5,417 44,685 1,876 ------------------------------------------------- In 2007, the Group received £2,000,000 (2006: £nil) from Doncaster MetropolitanBorough Council being the equity contribution in respect of their minorityinterest in Doncaster Management Company Limited. 7. Statement of net debt At 31 At 31 December December 2007 2006 £'000 £'000 --------------------------- Cash and cash equivalents 3,735 50 Bank overdrafts - (2,920) ---------------------------Net cash and cash equivalents 3,735 (2,870) Bank loans (32,357) 14,750)HBLB loans (present value of interest free loans) (6,952) (3,725) Finance lease liabilities - Worcester and Doncaster (632) (301) ---------------------------Racecourses Closing net debt (36,206) (21,646) --------------------------- 8. Summary of Southwell insurance proceeds Other Assets flood- Cash written related Income proceeds off costs Deferral statement £'000 £'000 £'000 £'000 £'000 ----------------------------------------------------- Flood damaged assets 4,586 (3,216) - - 1,370 Business interruption 2,014 - (31) (631) 1,352 -----------------------------------------------------Total 6,600 (3,216) (31) (631) 2,722 ----------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange