Renewal of Banking Facilities

 

TIDMDISL 
 
RNS Number : 9739R 
Discover Leisure PLC 
01 September 2010 
 

FOR IMMEDIATE RELEASE 
1 September 2010 
 
 
                              DISCOVER LEISURE PLC 
                      ('Discover Leisure' or 'the Group') 
 
                Renewal of Banking Facilities and Trading Update 
 
Discover Leisure plc is  pleased to announce that, on 31 August 2010, it 
successfully renewed its banking facilities with the Royal Bank of Scotland 
('RBS', 'Bank').  The renewal took account of the full impact of the last year's 
restructuring, the property disposal programme, current trading and the 
financial forecast for next year, in particular during the forthcoming out of 
season winter period. 
 
Overview 
 
* Group banking facilities successfully renewed 
* Trading in line with management expectations 
* Solid performance with like for like sales for new and used units up against 
the equivalent period last year 
 
Renewal of Banking Facilities 
 
The Group's existing facilities have previously been outlined in detail.  Their 
structure and the agreed modifications are summarised below: 
 
1)   A five year term loan to 2014 of GBP8m, secured against the five freehold 
sites from which the business continues to trade. 
 
The interest rate remains unchanged at 3.5% above Libor throughout the term but 
the capital repayment schedule has been modified including an improved match 
with the business' seasonality.  Capital repayments will remain at GBP500,000 
per year but will now be paid monthly rather than bi-annually, with one third of 
the annual repayment being paid in the months of October to March and two thirds 
in the months of April to September. The Group will also benefit from a five 
month capital repayment holiday. The previous facilities had a first payment of 
GBP250,000 in October 2010, which has now been replaced by the above monthly 
payments, which will now only begin in March 2011. 
 
In addition, and after a recent professional valuation, the existing use value 
of these sites has increased by 9.5% from GBP8.4m on 27 April 2009 to GBP9.2m on 
2 July 2010, thereby increasing the Banks security. 
 
2)   A three year asset disposal loan of GBP5m to 31 May 2012 secured against 
the seven freehold properties from which the Group ceased to trade in June 2009. 
 
Repayments are made from the net sale proceeds of these properties with the 
original interest rate payable at 2% above Libor, rising to 4% above Libor from 
1 March 2010, to 8% above Libor from 1 December 2010, and finally to 16% above 
Libor from 1 September 2011 until the end of the term. 
 
Recent announcements, including one on 19 July 2010, have provided an update on 
the Group's disposal progress.  Of the original seven properties, only the 
Portsmouth site remains and, subject to planning permission, this has been sold 
for GBP1.65m. When this sale completes, the disposal proceeds will total 
GBP4.865m leaving an estimated residue of GBP260,000 including accrued interest. 
The Group has agreed terms with RBS for the repayment of this balance over the 
remaining term to 31 May 2012 at a fixed interest margin of 4.75% over Libor. 
This will be met out of the Group's operating cash flow, with a repayment 
schedule which will also match the seasonality of the business. One third of the 
annual repayments will be taken between October and March and two thirds between 
April and September. 
 
 
3)   A GBP3m overdraft facility reviewed annually. 
 
After the June 2010 review, the facility will be temporarily increased to 
GBP3.3m for the period from 1 January 2011 to 31 March 2011 to provide 
additional headroom during this out of season period. The interest rate remains 
at 4% above bank base rate for any borrowings within the original GBP3m but will 
rise to 10% for any borrowing above the GBP3m during the above period. 
 
The RBS banking facilities, which were originally agreed in June 2009 as part of 
the restructuring process, incorporated a suite of covenants throughout the five 
year term of the bank borrowing. Some of these covenants were revised in 
December 2009 for the period to December 2010 in order to account for the impact 
of parts of the restructuring, which initially proved difficult to predict. 
During the recent RBS review, the Group requested that all banking covenants be 
assessed for the remaining four year period to take account of the business' 
current position.  A new set of covenants have therefore been agreed and have 
been incorporated into the revised facility documents with RBS. 
 
The Group has agreed a fee of GBP140,000 to RBS for renewal and revision of the 
facilities, including resetting of the related covenants. Associated 
professional costs of approximately GBP30,000 are expected in support of this 
exercise. 
 
Black Horse, part of the Lloyds Banking Group, continues to support the Group by 
way of inventory funding. 
 
The Directors are confident that, at current trading levels, the revised banking 
facilities are sufficient to support the business for the foreseeable future and 
that the Group can trade in compliance with the revised banking covenants. 
 
Trading Update 
 
The market for leisure vehicles and related accessories over the spring and 
summer months has benefited from the normal seasonal uplift. The impact, 
however, has been variable. The trade sales of new touring caravans has 
increased strongly (+23% March to June 2010 versus 2009), as dealers replenish 
stocks. However, UK registrations of the higher priced motor homes are 17% less 
than last year in the March to June period. In the five months from March to 
July, the Group has sold an encouraging 2% more new and used units than in the 
equivalent period last year on a like for like basis. 
 
Trading has therefore remained challenging but, as a result of the further 
stabilisation of the business since its major restructuring last year and the 
ongoing focus upon cost control, the Group has continued to trade within its 
finance facilities and its results have been in line with management's 
expectations. 
 
 
 
+-----------------------------------+-------------------+ 
| For further information please    |                   | 
| contact:                          |                   | 
|                                   |     01430 803 385 | 
| Discover Leisure plc              |                   | 
+-----------------------------------+-------------------+ 
| David Morrow, Chairman            |                   | 
+-----------------------------------+-------------------+ 
| Trevor Parker, Chief Executive    |                   | 
+-----------------------------------+-------------------+ 
| Neil Harwood, Finance Director    |                   | 
+-----------------------------------+-------------------+ 
|                                   |                   | 
| Panmure Gordon (UK) Limited       |     020 7459 3600 | 
+-----------------------------------+-------------------+ 
| Andrew Godber / Stuart Gledhill   |                   | 
+-----------------------------------+-------------------+ 
|                                   |                   | 
| Cubitt Consulting                 |     020 7367 5100 | 
+-----------------------------------+-------------------+ 
| Chris Lane /  Nicola Krafft       |                   | 
+-----------------------------------+-------------------+ 
 
 
Background Note 
 
Discover Leisure is a leading specialist caravan and leisure industry retailer 
which floated on AIM in May 2005. Following the restructuring of the Group's 
activities, it is focused on the retailing of caravans and motor homes in the 
North of England. It also sells a range of outdoor leisure products from its 
branches and over the internet. 
 
The Group has 5 branches across the North of England located at: Birtley 
(Tyneside), Delamere (Cheshire), Chorley (Lancashire), Darlington (County 
Durham) and York (Yorkshire). Its head office is situated in East Yorkshire. 
 
The board consists of David Morrow, Chairman; Trevor Parker, Chief Executive; 
and Neil Harwood, Finance Director. The Non Executive Directors are Ian Currie, 
Simon Dixon and James Hayward. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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