13 Aug 2008 07:00
For release at 0700 on 13 August 2008
Stagecoach Theatre Arts plc (STA.L)
("Stagecoach" or "the Group")
Preliminary Announcement of Final Results
for the year ended 31 May 2008
"Stagecoach Theatre Arts plc operates the UK's largest franchise network of part-time performing arts schools for children aged between 4 and 16"
"A year of outstanding progress - 20 years of continuing growth"
Highlights:
Profit before tax up 89 per cent to £0.71 million (2007: £0.37m), and 33 per cent ahead of market expectations, due to more students than forecast and continued reduction in overheads.
Franchise network fees (i.e. underlying school fees throughout franchise network) up 7.5 per cent to £28.5m (2007: £26.5m) reflecting strong performance of franchisees worldwide.
Earnings Per Share substantially up by 200 per cent to 5.1p (2007: 1.7p).
Proposed resumption of dividend payment of 2p per share (2007: nil).
Healthy cash balance at year end of £1.0m (2007: £0.3m).
Total student numbers worldwide up by 3.6 per cent to over 40,600 (2007: 39,200), as demand for performing arts tuition for children in the UK and overseas continues to grow.
Launch of Stagecoach's on-line Shop, (www.stagecoachshop.co.uk), and now ready to extend the range of merchandise with marketing due to commence shortly.
The main Stagecoach UK business, which accounts for 92 per cent of network fees, continues to grow strongly, with profit before tax up 10.7 per cent to £0.82m (2007: £0.74m).
Following the restructuring of the US operations, the US cost base will be minimal going forward, whilst the new Area Development Agreement will provide an opportunity to build for future success.
The German network continues to trade well, with further scope for expansion in other overseas areas such as in Greece and Ireland.
David Sprigg, Managing Director, commented:
"This year marks the 20th Anniversary of Stagecoach Theatre Arts, and with record network fees, an 89% increase in profit before tax, and a return to the dividend list, this has truly been a year to celebrate."
ENDS
Enquiries:
| Stagecoach Theatre Arts Richard Dawson, Finance Director and Investor Relations | Tel: 01932 254 333 / 07775 643 939 www.stagecoach.co.uk |
| Smith & Williamson Corporate Finance Limited - Nominated Adviser David Jones / Siobhan Sergeant | Tel: 020 7131 4000 |
| Public Relations, Adventis Financial PR Tarquin Edwards | Tel: 020 7034 4758 / 07879 458 364 |
Chairman's Statement
Overview
This has been an excellent year for the Group. We have seen continuing growth in our core Stagecoach Theatre Arts business whilst delivering on our cost reduction programme. I am delighted to report an 89 per cent increase in Group profit before tax and a return to the dividend list.
The Group celebrated its 20th anniversary this year, and we have increased network fees through organic growth alone for the 20th consecutive year to £28.5 million (2007: £26.5 million). Network fees reflect total school fees earned over the year by our franchisees from the 40,600 students (2007: 39,200) that now attend Stagecoach, SportsCoach and Mini Stages schools worldwide.
The Group reports profit before tax of £707,000 (2007: £375,000) for the year to 31 May 2008, with earnings per share of 5.1 pence (2007: 1.7 pence). Your Board is pleased to propose the payment of a 2 pence dividend per ordinary share (2007: nil).
Strategy
I reported in my statement two years ago that we required each part of our business either to contribute a profit or to be restructured. By the end of the year we had completed the restructuring of SportsCoach, Mini Stages and the German and US operations. The Agency business, now forming an integral part of the Stagecoach UK franchise operation, has been brought in-house following the buy-out of our minority interest partners.
Furthermore, this year sees the benefits of the cost cutting exercise undertaken over the prior two years, reducing overheads where possible, including a reduction in staff, premises and other costs.
The Group is now in a good position to fulfil its key strategy of each business area contributing to profitability, and we are pleased to see SportsCoach move from a significant loss last year to operating profit this year. Stagecoach UK continues to provide the majority of profits, with the Montessori nursery and SportsCoach also contributing a profit. Stagecoach Germany's operating losses are reduced as it continues to expand its network, and the completion of the significant US restructuring including the sale of the first Area Development Agreement may pave the way to future profitability from these overseas areas.
The Group continues to support the Stagecoach Charitable Trust, which runs InterAct Theatre Workshops, providing inclusive performing arts tuition to children of all abilities and needs.
Employees
I wish to express my thanks to all the employees for their commitment and contribution throughout the year, all of which has helped to deliver this outstanding performance.
Prospects
We are very pleased to see such a solid performance, particularly in view of the increasingly tough wider economic climate. Stagecoach Theatre Arts has yet to see any negative impact resulting from the widely-reported fall in consumer economic confidence. Whilst we remain alert to any changes or threats that we might see in our market, we look forward to benefitting from continued enthusiasm from our students in their Stagecoach training, and the increasing demand nationwide for children's part-time performing arts tuition.
Your Board anticipates further growth in the Stagecoach Theatre Arts UK network, with several new Stagecoach schools and Early Stages classes already contracted to open in September 2008. We are hopeful of long-term growth in SportsCoach and with our German and US-based operations, as well as looking to secure licences for new overseas areas.
Graham Cole
Chairman
13 August 2008
Operating Review
Group Overview
This year marks the 20th Anniversary of Stagecoach Theatre Arts, and with record network fees of £28.5 million (2007: £26.5 million) and with a profit before tax of £707,000 (2007: £375,000) this has truly been a year to celebrate.
The business started with three schools in Surrey in 1988 and we have grown each year to the current total of 669 Stagecoach schools, 750 Early Stages classes, 26 SportsCoach schools, 10 Early Sporties and 62 Mini Stages classes, with 40,600 students worldwide. The directors believe there is still significant growth potential ahead within the business.
Stagecoach Theatre Arts UK
We have seen further growth in Stagecoach UK this year, particularly as existing franchisees expand their businesses, increasing the number of schools and Early Stages classes that they operate. During the year 14 Stagecoach schools and 28 Early Stages classes opened.
The number of Stagecoach Theatre Arts main schools for 6 to 16 year olds in the UK increased to 621 schools with 26,554 students attending (2007: 603 schools and 25,847 students).
Early Stages classes, providing performing arts tuition to younger students aged 4 to 6 years, increased to 698 classes in the UK with 9,439 students attending (2007: 666 Early Stages classes and 8,663 students). We have seen enormous growth in this market over the past few years, and these younger classes act as an important feeder to the main schools.
The total number of students attending Stagecoach schools in the UK, including Early Stages and Further Stages classes, increased from 34,739 to 36,260 students. With the average number of students per main Stagecoach school at 42.8 (2007: 42.9), the occupancy rate remains strong at approximately 95 per cent of all available places taken, based on an optimum number of students per class of 45.
The average number of Stagecoach schools per franchisee is 2.3 schools. In September 2007, our most prolific franchisee in terms of number of schools opened a record seventh Stagecoach school, and now runs seven main schools and thirteen Early Stages classes in the Darlington and Yarm areas. However, there are still only 32 of the 265 UK franchisees who run four or more main Stagecoach schools, showing there is still considerable scope for further growth from the existing network.
Whilst continuing to grow the business, we are committed to maintaining the highest standards of education throughout, including regular unannounced school inspections, regional franchisee meetings and franchisee and teacher training. Parents receive progress reports twice a year and students receive medals for longevity and participation. The skills students learn at Stagecoach help them perform better in life.
Mini Stages classes, which provide an introduction to music for children from six months to four years old, act as a feeder to Early Stages. Mini Stages faces widespread low-cost competition and has proved to be most successful when operated by an existing franchisee as part of their overall Stagecoach business. At the end of last year we ceased offering Mini Stages as a separate franchise business model and focused on its integration into the Stagecoach network. This has led to an overall decline in student numbers, but the Group will benefit from reduced overheads in this area.
During the year under review, there were non-recurring restructuring and Head Office redundancy costs for Mini Stages. For the year ahead, we expect a positive operating contribution from Mini Stages classes.
At year-end, there were 11 Mini Stages schools in the UK, from which 55 teaching sessions were held, and a total of 589 students attending (2007: 19 schools, 73 sessions and 723 students). Network fees for Mini Stages were £142,000 (2007: £141,000).
Stagecoach UK, including Mini Stages, the Montessori School and the Stagecoach Agency, reported operating profits before overheads of £2.7m (2007: £2.5m). After attributing all UK overheads the Stagecoach UK profit before tax was £819,000 (2007: £740,000).
Stagecoach Agency
Following the acquisition on 1 June 2007 of the outstanding 25 per cent share capital of the Stagecoach Agency, it now forms an integral part of the Stagecoach Theatre Arts Group.
As the largest children's and young performers' agency in the UK, the Stagecoach Agency has continued to expand its influence throughout the entertainment industry. In its third year the Agency secured over 3,500 professional auditions or work placements for Stagecoach students.
The Agency provides a comprehensive range of services to Casting Directors and Production Companies who in turn offer Stagecoach students work opportunities within a wide range of entertainment platforms. These include TV and Film, Commercials and Corporate Videos, Theatre, Radio Dramas, Photo Shoots and Promotions, Musicals and Voice-Overs.
Assignments won this year by the Agency include parts for students in most major television series and many other high-profile productions, both domestic and international. Such credits include TV roles in Waterloo Road, New Heroics, Mi High, Outnumbered, EastEnders, Dr Who, Tess of The D'Urbervilles, Torchwood, Grange Hill, The Bill, Casualty and Hollyoaks; film credits include Godforsaken, Bindhu's Birthday, Bronson, Mr. Loran, The Golden Compass, The Insiders; and in theatre Billy Elliot, Chitty Chitty Bang Bang, The Sound of Music, Mary Poppins, Baby Girl, and Merry Wives of Windsor at The Globe; voiceover credits include Peppa Pig, Noddy, Little Kingdom, Cbeebies Radio, Tommy Zoom, and Disney - Tigger, Pooh and Friends.
The Agency's continued growing success offers excellent publicity opportunities for individual Stagecoach schools throughout the UK.
Creative and Educational Department
By working closely with our franchisees, the Group continues to provide the highest standards of performing arts education and opportunity throughout the Stagecoach network. The Creative and Educational Department is committed to being at the forefront of standards of education in the performing arts.
Each year the Stagecoach network provides its students with opportunities to participate in special performances and events. The events this year included:
June 2007 and again in November 2007 - a total of 600 students from all over the UK performed a selection of dance, drama and singing routines at Her Majesty's Theatre in London's West End.
the annual 'Easy Stages' show-case production of Oliver! in August 2007 featured 70 Stagecoach students from schools across the UK and overseas.
December 2007 - 32 Stagecoach schools from the Midlands featuring 2,000 students raised the roof with performances of Drama, Dance and Singing at Birmingham's National Indoor Arena to raise money for InterAct.
December 2007 - several Stagecoach Regional Choirs performed at the "Spirit of Christmas" concerts touring the UK's Cathedrals, in aid of Muscular Dystrophy.
February 2008 - 50 Stagecoach students came together to workshop a production of Gladrags, a specially written musical by Veronica Bennetts to celebrate the 20th Anniversary of Stagecoach Theatre Arts.
May 2008 - Stagecoach invited 400 students from all over the UK to a production of Hairspray in London's West End, and after the show the students enjoyed a question and answer session with members of the cast.
The Stagecoach Foundation Course continues to be run twice yearly, with significant workshop input from The Royal Academy of Dramatic Art ('R.A.D.A'). The course, designed with the particular needs of Stagecoach and part-time theatre arts schools in mind, has accreditation from Trinity/Guildhall as part of their A.T.C.L in Musical Theatre (Associate of Trinity College London).
Regional teacher training workshops offer Stagecoach teachers and franchisees in-service development by top leaders in performing arts. Stagecoach's training, together with these extra-curricular performing opportunities, offers immense benefits to students in the growth of confidence and self-esteem as well as fostering enjoyment and well being.
Stagecoach on-line shop
www.stagecoachshop.co.uk
In November 2007, we launched www.stagecoachshop.co.uk, an on-line shop offering children's toys, clothing and literature and other merchandise to Stagecoach students and the general public. During the technical and logistical testing period, the Stagecoach shop offered a limited product range of dolls/puppets, clothes, make-up and books/plays.
We have now proven over the past six months that, in collaboration with Lester Bowden, our established supplier of student clothing and other products, we are able to operate an on-line shop and fulfil orders to high levels of customer satisfaction. We are now extending the product line and will commence marketing as the Group looks to develop this new merchandising revenue stream.
SportsCoach franchises
During the year, we completed the process of integrating the SportsCoach franchises into the Stagecoach UK support and reporting function, with the Stagecoach UK franchise managers overseeing the SportsCoach schools within their regions. The purpose of these changes was to reduce the overheads and other operating costs of running SportsCoach as a separate network, whilst still providing full support to all franchisees. The SportsCoach franchises were transferred onto our Stagecoach internet-based real-time data management system, which has proved to be an important internal management tool for the Stagecoach schools.
Despite a small number of school closures, this restructuring has been a success, as evidenced in the increase in average student numbers to 39.0 (2007: 35.0), greatly reduced overheads and the move into profitability for SportsCoach.
Network fees of SportsCoach were £835,000 (2007: £997,000). At year-end there were 26 schools, 10 Early Sporties and 1,156 students (2007: 29 schools, 8 Early Sporties and 1,191 students).
We are delighted to report that SportsCoach produced profit before tax of £11,000 (2007: loss £190,000).
Overseas operations
The Group's overseas operations include wholly owned US and German subsidiaries, each running Stagecoach Theatre Arts franchise networks, and Stagecoach schools operated under licence or direct franchise agreement in Australia, Canada, Gibraltar, Ireland, Malta and Spain.
In January 2008, we granted exclusive franchise development rights for Stagecoach Theatre Arts in Athens, to a Greek group that has the Western Union Agency for the whole of Greece, among other business interests. The first Stagecoach school in Athens is scheduled to open in September.
USA and Germany
The restructuring of the US operations was completed in May 2008. We closed our head office in Minnesota and from 1 June 2008, we no longer directly employ any head office staff in the US. We are able to provide full support for our US franchisees from the UK whilst retaining a self-employed part-time administrator in the US. Non-recurring restructuring costs and write-offs were incurred during the year. The full benefits of this cost-cutting strategy will be experienced in the year ahead.
We have entered into an Area Development Agreement with a US corporation for them to open and operate Stagecoach Theatre Arts schools under franchise from the Group in New York, New Jersey and Pennsylvania. It opened two schools in Pennsylvania in April 2008 and plans to open more schools across the three States in a phased expansion programme. The Area Developer will provide its own head office function and will bring local knowledge and expertise to the Stagecoach US operating system.
Following the acquisition of the outstanding 10 per cent of Stagecoach Germany and the subsequent restructuring of the management team, the German subsidiary is trading well with average student numbers of 36.8 per school. We are now looking to expand our franchise network in Germany in order to reach and surpass the critical mass number of franchisees and schools required to make the business operation profitable.
Stagecoach USA and Stagecoach Germany reported losses before tax of £78,000 and £105,000 respectively (2007: losses of £65,000 and £148,000 respectively). Between these two overseas markets, at year end there were 17 franchisees, 28 Stagecoach schools, 28 Early Stages classes, 2 Further Stages classes and a total of 1,229 students (2007: 1,267 students).
Other overseas
For the first time we report on the other overseas operations separately. As the number of students and schools grow, this area of the business will have a greater impact on the Group. The key to the success of the overseas operations has always been to identify and secure the right calibre of person in the local country.
We are delighted to welcome to the Group our new franchisee in Athens and our second franchisee in Ireland.
All overseas franchisees attend our one week's intensive training course at our Head Office in the UK and following site visits and assistance with launching new schools they are well positioned to make their Stagecoach businesses a success.
At year end, there were 5 franchisees, 20 Stagecoach schools, 24 Early Stages classes, a Further Stages class, 7 Mini Stages classes and a total of 1,281 students (2007: 1,179 students). The average student numbers were 41.4 per school. With estimated network fees of £537,000, these other overseas operations contributed an estimated profit before tax of £59,000 (2007: £38,000).
Employees
The number of employees (full time equivalents) employed by the Group as at 31 May 2008 is 48 (2007: 58 full time equivalent employees).
Stagecoach Charitable Trust
The Group continues to support and provide management time to the Stagecoach Charitable Trust, which amongst other activities runs InterAct Theatre Workshops, providing inclusive performing arts tuition to children of all abilities and needs. The feedback from the children attending InterAct and their parents has been overwhelmingly positive. The highlight of the year was the exhilarating performance of the InterAct students live at Her Majesty's Theatre, London, along with Stagecoach students to a sell-out audience.
Current Trading and Prospects
The popularity of our Stagecoach Theatre Arts schools remains as high as ever, with new schools and Early Stages classes opening each term. With more immediate growth prospects in the UK, and considerable long-term growth potential for SportsCoach, Stagecoach Germany and USA, as well as other new overseas territories, the prospects for the future look encouraging.
David Sprigg Stephanie Manuel
Joint Managing Director Artistic Director and Joint Managing Director
13 August 2008
Financial Review
The strong financial results reflect the combination of growth in network fees and reduced costs. This has had a positive impact on the Group's cash position, with peak post balance sheet cash balance of £2.3 million as at 30 June 2008.
Network Fees and Group Turnover
Network fees, reflecting the total schools fees earned by our network of franchisees running Stagecoach Theatre Arts schools worldwide and SportsCoach schools in the UK, increased 7.5% to £28.5 million (2007: £26.5 million). The UK Stagecoach Theatre Arts schools account for 92% of network fees (2007: 91%).
Group turnover, made up of continuing franchise fees, initial fees, transfer fees and other ancillary income remained level at £6.3m (2007: £6.3m). However, on a comparable basis, within turnover the continuing franchise fees increased by £0.2 million as a result of growth in the number of Stagecoach students and increase in fees, which was offset by a corresponding decrease in non-recurring revenue streams.
Cost of Sales and Administrative Expenses
As a consequence of the Group restructuring and cost cutting initiative, the Group costs of sales has reduced by 13.5% to £3.2m (2007: £3.7m).
The cost reductions reflect several middle management positions that have become vacant or where individuals have taken voluntary redundancy and not been replaced. Such salary reductions have been made possible as a result of the Group restructuring. Other cost reductions were from closing one of two head office premises in Walton-on-Thames in May 2007, resulting in reduced rent payable as well as associated utilities, office and communications costs.
Administrative expenses, prior to Directors' performance bonuses and staff annual bonus pool, were comparable to the prior year. Taking into account bonuses, the administrative expenses increased to £2.5m (2007: £2.3m).
Profitability
As a consequence of the increased network fees and reduced costs, the Group reported an 89% increase in profit before tax to £707,000 (2007: £375,000).
Taxation
The Group's effective tax rate reduced to 29% from 32% (excluding the 2007 deferred tax adjustment in respect of previous years). The losses of the overseas subsidiaries cannot be set off against UK company corporation tax under current HMRC regulations. As these overseas losses reduce, the overall Group effective tax rate will move towards the standard UK corporation tax rate. The Company has lodged a claim with HMRC in respect of earlier years for EU loss relief to be off-set against UK corporation tax. The Company is investigating whether similar claims can be made for this current year.
During the year the Company submitted a £400,000 Research and Development tax relief and tax rebate claim for the work undertaken on our Global Reporting Management System, which was developed and paid for between 2004 and 2007. No potential benefit of this claim is provided for in these results.
Earnings per share and dividends
Basic earnings per share were 5.1 pence (2007: 1.7 pence).
Your Board is pleased to propose the payment of a dividend of 2 pence (2007: nil). The proposed dividend, which amounts to £197,586 will be paid on 25 November 2008 to those shareholders on the register as at 7 November 2008. This dividend has not been accounted for in this set of accounts, in line with accounting standards, as shareholders have not yet approved the payment.
Share capital and share options
There were no changes in share capital during the year, with 9,879,317 ordinary shares in issue.
Following the acquisition of the outstanding share capital of the Stagecoach Agency, its staff were awarded 14,000 share options, in line with the Group policy of an all-employee share option scheme. No options were exercised during the year and 56,427 options lapsed on employees leaving the Group. There remain 1,005,335 options in issue, being 10.2% of shares in issue, with an exercise price between 32.5 pence and 112.5 pence.
Group Structure
This year marks the end of the two year Group restructuring plan, and many of the resulting benefits have been borne out in these results.
On 1 June 2007 the outstanding 25 per cent share capital of the Stagecoach Agency was acquired and its operations were immediately transferred to the parent company, meaning that we are no longer running the Agency as a separate subsidiary. The Group now consists of wholly owned German and US subsidiaries, an Agency business forming part of the Stagecoach UK offering, and SportsCoach and Mini Stages franchises integrated into the Stagecoach UK franchise support system. The other overseas operations run under licence or direct franchise.
Your Board's primary objective continues to be to bring each of the franchise networks to operating profitability as soon as possible.
Balance Sheet
The Group had total equity at 31 May 2008 of £3.0 million (2007: £2.5 million). The increase in total equity principally relates to the profit for the year.
Cash flow
During the year the Group generated £1.1 million net cash inflow from the operations (2007: £0.5 million). The principal non-operating cash payments during the year have been:
£167,000 taxes on profits
£48,000 capital expenditure
£84,000 part-payment for the acquisition of the minority interest in Stagecoach Agency
£61,000 reduction in bank loan
The above resulted in an increase in cash generated during the year of £691,000 (2007: £296,000).
The significant consequence of the positive cash flow over the past two years was that the Group has not required the use of its overdraft facility since October 2007. The Group receives the majority of its cash inflow three times a year, six weeks into each academic term, from continuing franchise fees for that term. Thus typically October and February are the lowest cash points, just prior to the collection of the Autumn Term and Spring Term fees respectively. However, significantly, the Group did not go into overdraft in February of this year.
The Group has a healthy cash position, with net cash of over £1 million at year end.
IFRS
These are the first set of annual results prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). While the application of Adopted IFRS has no fundamental impact on the previously reported results for the Group, the full year results to 31 May 2007 have been restated in accordance with Adopted IFRS.
Financial outlook
Trading post year-end has continued in line with expectations with £4.4 million of Stagecoach UK network fees earned in June and July 2008 and positive cash inflow for the Group.
Richard Dawson
Group Finance Director
13 August 2008
Consolidated Income Statement
for the year ended 31 May 2008
| Notes | 2008 | 2007 | |||
| £'000 | £'000 | ||||
| Network fees (see note) | 28,466 | 26,544 | |||
| Revenue | 6,326 | 6,324 | |||
| Cost of sales | (3,177) | (3,654) | |||
| Gross profit | 3,149 | 2,670 | |||
| Other operating income | 30 | 22 | |||
| Administrative expenses | (2,482) | (2,299) | |||
| Operating profit | 697 | 393 | |||
| Financial income | 22 | 10 | |||
| Financial expenses | (12) | (28) | |||
| Net financing income/(expense) | 10 | (18) | |||
| Profit before tax | 707 | 375 | |||
| Taxation | 3 | (206) | (205) | ||
| Profit for the year | 501 | 170 | |||
| Attributable to: | |||||
| Equity holders of the parent | 501 | 180 | |||
| Minority interest | - | (10) | |||
| Profit for the year | 501 | 170 | |||
| Earnings per share (pence) | |||||
| Basic earnings per share | 5 | 5.1 | 1.7 | ||
| Diluted earnings per share | 5 | 5.0 | 1.7 |
Note: Network fees represent total school fees earned over the year by our franchisees from over 40,600 students that attended Stagecoach, SportsCoach and Mini Stages worldwide.
Consolidated Statement of Recognised Income and Expenses
for the year ended 31 May 2008
| 2008 | 2007 | |||||
| £'000 | £'000 | |||||
| Foreign exchange translation differences | (22) | (1) | ||||
| Net expense recognised directly in equity | (22) | (1) | ||||
| Profit for the year | 501 | 170 | ||||
| Total income and expense recognised for the year | 479 | 169 | ||||
| Attributable to: | ||||||
| Equity holders of the parent | 479 | 179 | ||||
| Minority interest | - | (10) | ||||
| Total income and expense recognised for the year | 479 | 169 |
Consolidated Balance Sheet
at 31 May 2008
| 2008 | 2007 | |||||
| £'000 | £'000 | |||||
| Non-current assets | ||||||
| Property, plant and equipment | 100 | 90 | ||||
| Intangible assets | 1,376 | 1,505 | ||||
| Total non-current assets | 1,476 | 1,595 | ||||
| Current assets | ||||||
| Inventories | 303 | 298 | ||||
| Trade and other receivables | 2,340 | 1,932 | ||||
| Cash and cash equivalents | 1,032 | 341 | ||||
| Total current assets | 3,675 | 2,571 | ||||
| Total assets | 5,151 | 4,166 | ||||
| Equity | ||||||
| Share capital | 494 | 494 | ||||
| Share premium | 1,601 | 1,601 | ||||
| Translation reserve | (35) | (13) | ||||
| Retained earnings | 916 | 407 | ||||
| Total equity | 2,976 | 2,489 | ||||
| Non-current liabilities | ||||||
| Other interest-bearing loans and borrowings | 50 | 116 | ||||
| Other payables | - | 98 | ||||
| Deferred tax liabilities | 16 | 64 | ||||
| Total non-current liabilities | 66 | 278 | ||||
| Current liabilities | ||||||
| Other interest-bearing loans and borrowings | 66 | 61 | ||||
| Trade and other payables | 2,043 | 1,338 | ||||
| Total current liabilities | 2,109 | 1,399 | ||||
| Total liabilities | 2,175 | 1,677 | ||||
| Total equity and liabilities | 5,151 | 4,166 |
The financial statements were approved by the board of directors on 13 August 2008 and were signed on its behalf on by:
| Stephanie Manuel | David Sprigg | |
| Director | Director |
Cash Flow Statement
for the year ended 31 May 2008
| 2008 | 2007 | |||||
| £'000 | £'000 | |||||
| Cash flows from operating activities | ||||||
| Profit for the year | 501 | 170 | ||||
| Adjustment for: | ||||||
| Depreciation and amortisation | 159 | 139 | ||||
| Foreign exchange differences | (41) | 5 | ||||
| Financial income | (22) | (10) | ||||
| Financial expense | 12 | 28 | ||||
| Loss on disposal of property, plant and equipment | 8 | 8 | ||||
| Employee share option scheme | 8 | 20 | ||||
| Taxation | 206 | 205 | ||||
| Operating profit before changes in working capital and provisions | 831 | 565 | ||||
| (Increase)/decrease in trade and other receivables | (393) | 281 | ||||
| Increase in inventories | (5) | (19) | ||||
| Increase/(decrease) in trade and other payables | 623 | (354) | ||||
| Cash generated from the operations | 1,056 | 473 | ||||
| Interest received | 22 | 10 | ||||
| Interest paid | (12) | (28) | ||||
| Taxation paid | (167) | - | ||||
| Net cash from operating activities | 899 | 455 | ||||
| Cash flows from investing activities | ||||||
| Proceeds from sale of property, plant and equipment | - | 1 | ||||
| Acquisition of additional shares in subsidiaries | (99) | (51) | ||||
| Acquisition of property, plant and equipment | (48) | (21) | ||||
| Acquisition of intangible assets | - | (184) | ||||
| Net cash used in investing activities | (147) | (255) | ||||
| Cash flows from financing activities | ||||||
| Proceeds from borrowings | - | 150 | ||||
| Repayment of borrowings | (61) | (54) | ||||
| Net cash (used in)/generated from financing activities | (61) | 96 | ||||
| Net increase in cash and cash equivalents | 691 | 296 | ||||
| Cash and cash equivalents at 1 June | 341 | 45 | ||||
| Cash and cash equivalents at 31 May | 1,032 | 341 |
Notes to the Preliminary Results
1. Basis of preparation
The preliminary results have been based on the accounting policies which are disclosed in the Annual Report and Accounts 2008. The Group financial statements have been prepared and approved by the directors in accordance with Adopted IFRSs.
Statement of compliance
The group is preparing their financial statements in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs') and its interpretations adopted by the International Accounting Standards Board (IASB).
An explanation of how the transition to Adopted IFRSs has affected the reported financial position, financial performance and cashflows for the Group is provided in note 6.
2. Acquisition of minority interest and hive-up of trade and net assets of subsidiary
On 1 June 2007 the Company exercised the put and call option agreement, which existed at the prior year end, and purchased the remaining 25 per cent in Stagecoach Agency (UK) Limited from the minority shareholders for £165,875 (including acquisition costs, £84,125 was paid during the year and £81,750 on 1 July 2008). The previous recognition of the liability on transition to Adopted IFRSs resulted in an increase in goodwill of £165,898, discounted at the transition date.
The net assets of Stagecoach Agency (UK) Limited were then hived-up into the Company's operations on 1 June 2007 at net book value. Stagecoach Agency, which is Stagecoach's own casting agency for the young performers in the UK, now forms an integral part of the Stagecoach UK business.
Stagecoach Agency (UK) Limited's net liabilities on 1 June 2007:
| £ | |
| Property, plant and equipment | 19,180 |
| Trade and other receivables | 60,128 |
| Cash and cash equivalents | 134,520 |
| Trade and other payables | (213,437) |
| Deferred tax liabilities | (484) |
| Net identifiable liabilities | (93) |
| Additional 25% acquired of net liabilities | (23) |
| Goodwill on acquisition of the additional 25% included in the consolidated balance sheet | 165,898 |
| Consideration paid for the 25% (including legal fees of £2,375) | 165,875 |
| Cost of investment in the original 75% | 15,407 |
| Goodwill included in the Company balance sheet on hive-up into Stagecoach UK operations | 181,282 |
3. Taxation
Recognised in the income statement
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Current tax expense | |||
| Current year | 253 | 167 | |
| Adjustments for prior years | - | (37) | |
| Current tax expense | 253 | 130 | |
| Deferred tax expense | |||
| Reversal and origination of temporary differences | (43) | (11) | |
| Reduction in tax rate | (4) | - | |
| Adjustment to tax charge in previous periods | - | 86 | |
| Deferred tax (credit)/expense | (47) | 75 | |
| Total tax expense in income statement | 206 | 205 |
Deferred tax arose principally due to timing differences between capital allowances and depreciation.
Reconciliation of effective tax rate
The total charge for the period is higher than the standard rate of corporation tax in the UK 29.67% (2007: 30%). The differences are explained below:
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Profit for the year | 501 | 170 | |
| Total tax expense | 206 | 205 | |
| Profit excluding taxation | 707 | 375 | |
| Tax using the UK corporation tax rate of 29.67% (2007: 30%) | 210 | 113 | |
| Effects of: | |||
| Unrelieved losses of overseas subsidiaries | 37 | 30 | |
| Permanent tax differences | (37) | 13 | |
| Reduction in tax rate | (4) | - | |
| Adjustment to tax charge in previous periods | - | 49 | |
| Total tax expense | 206 | 205 |
4. Dividends
The proposed final dividend had not been approved by shareholders at 31 May 2008 and therefore has not been included as a liability. There was no comparative final dividend at 31 May 2007.
The proposed final dividend of 2p (2007: nil) per ordinary share will be paid on 25 November 2008 to those shareholders on the register as at 7 November 2008.
5 Earnings per share
| 2008 | 2007 | ||
| Earnings | |||
| Profit for the year for basic and diluted earnings per share (£'000) | 501 | 170 | |
| Number of shares | |||
| Weighted average number of shares used for basic earnings per share (£'000) | 9,879 | 9,879 | |
| Dilutive effect of share options | 106 | 52 | |
| Fully diluted weighted average number of shares used for diluted earnings per share (£'000) | 9,985 | 9,931 | |
| Basic earnings per share (pence) | 5.1 | 1.7 | |
| Diluted earnings per share (pence) | 5.0 | 1.7 |
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding by the number of shares deemed to be issued for no consideration (options granted to employees).
6. Explanation of transition to Adopted IFRSs
As stated in Note 1, these are the Group's first consolidated financial statements prepared in accordance with Adopted IFRSs.
The accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended 31 May 2008, the comparative information presented in the financial statements for the year ended 31 May 2007 and in the preparation of an opening IFRS balance sheet at 1 June 2006 (the Group's date of transition).
In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported previously in financial statements prepared in accordance with its old basis of accounting, United Kingdom Generally Accepted Accounting Principles (UK GAAP). An explanation of how the transition from previous UK GAAP to Adopted IFRSs has affected the reported financial position, financial performance and cash flows of the Group is set out in the following tables and the notes that accompany the tables.
The transition from UK GAAP to Adopted IFRSs did not have a significant effect on the Group's cash flows.
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRS in the transition period. The following exemptions have been taken:
Share-based payments
The Group has taken the exemption not to apply IFRS 2 'Share-based Payment' to equity-settled share options granted before 7 November 2002 or granted after that date but which had vested by the transition date.
Business combinations
The Group has chosen not to restate business combinations completed prior to the transition date on an Adopted IFRS basis.
The transition to Adopted IFRS did not result in substantial changes to the Group's accounting policies under UK GAAP and as set out in the Group's financial statements of the year ended 31 May 2007. In summary the changes are:
IAS 1 'Presentation of Financial Statements' and IAS 7 'Cash Flow Statements' have affected the overall presentation of the financial statements and certain disclosures.
The adoption of IFRS 3 'Business Combinations', IAS 36 'Impairment of Assets' and IAS 38 'Intangible Assets' have resulted in a change in the accounting policy for goodwill. Under UK GAAP, goodwill was amortised on a straight line basis over a period of 20 years and assessed for an indication of impairment at each balance sheet date. In accordance with the provisions of IFRS 3 and IFRS 1, the Group ceased amortisation of goodwill from 1 June 2006. Accumulated amortisation as at 31 May 2007 has been eliminated with a corresponding decrease in the cost of goodwill. From the year ended 31 May 2007 onwards, goodwill is tested for impairment at each balance sheet date, as well as when there are indications of impairment. The Group has reassessed the useful lives of its intangible assets in accordance with the provisions of IAS 38. No adjustment resulted from this reassessment.
The transition to Adopted IFRS has resulted in the recognition of a liability in respect of the minority put and call option agreement, because minority interests are considered to be part of Group equity under IFRS.
Development costs that do not meet the criteria of IAS 38 'Intangible Assets' have not been recognised at the transition date.
The transition to Adopted IFRS resulted in the following changes in accounting policies:
(a) Goodwill is not amortised but measured at cost less impairment losses. Under UK GAAP, goodwill was amortised on a straight line basis through profit and loss over its estimated useful economic life of 20 years. The effect of the change is an increase in intangible assets, equity and profit before tax for the Group of £46,001 at 31 May 2007. The change does not affect intangible assets, equity or profit before tax at 1 June 2006. The change has no tax effect as deferred taxes are not recognised for temporary differences arising from goodwill for which amortisation is not deductible for tax purposes.
(b) Computer software has been reclassified from tangible fixed assets to intangible fixed assets. The effect of the change is an increase in intangible assets and a decrease of tangible assets for the Group of £567,041 at 1 June 2006 and £524,170 at 31 May 2007. The change does not affect equity or profit before tax of any period.
(c) Development costs which do not meet the recognition criteria under IAS 38 have not been recognised at the transition date which has resulted in a decrease in equity and intangible assets for the Group of £24,823 at 1 June 2006, an increase in profit before tax of £18,921 at 31 May 2007 and a decrease of intangible assets and equity of £5,902 at 31 May 2007. The change has no tax effect as deferred taxes were not recognised under UK GAAP for temporary differences arising from development costs for which amortisation was not deductible for tax purposes.
(d) The translation reserve is shown as separate reserve component of equity for the Group.
(e) The put and call option agreement for the purchase of minority interest, has been recognised as a liability. The effect of the change is an increase in non-current liabilities and intangible assets for the Group and increase in non-current liabilities and investment in subsidiaries for the Company of £156,486 at 1 June 2006, an increase in non-current liabilities and current liabilities for the Group of £82,949 at 31 May 2007 and an increase of intangible assets for the Group and investment in subsidiaries for the Company of £165,898 at 31 May 2007. The change does not affect equity or profit before tax of any period.
(f) The deferred tax liability has been reclassified from current liabilities to non-current liabilities. The effect of the change is an increase in non-current liabilities and a decrease for the Group of current liabilities of £1,852 at 1 June 2006 and £63,252 at 31 May 2007. The change does not affect equity or profit before tax of any period.
7. Extract from the Group's statutory accounts
The financial information presented in this preliminary announcement does not constitute statutory accounts within the meaning of the Companies Act 1985. The information has however been extracted from the Group's statutory accounts for the year ended 31 May 2008 which were approved by the Board on 13 August 2008 and on which the Group's auditors have given an unqualified opinion.
8. Responsibility
The Directors of the company accept responsibility for the information contained in this document and to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
9. Annual Report and Accounts available on the website
The Annual Report and Accounts, which will be posted to shareholders as soon as practicably possible, are available to download via the website, www.stagecoach.co.uk. A copy of the Annual Report and Accounts may be obtained upon application to the Company Secretary, subject to availability, at the Company's Registered Office, The Courthouse, Elm Grove, Walton-on-Thames, Surrey, KT12 1LZ.