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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Snoozebox | LSE:ZZZ | London | Ordinary Share | GB00B7D66J40 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.3575 | 0.35 | 0.365 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMZZZ
RNS Number : 6182J
Snoozebox Holdings PLC
29 June 2017
29 June 2017
Snoozebox Holdings plc
Preliminary announcement of results for the year ended 31 December 2016
Snoozebox Holdings plc (AIM: ZZZ), ("the Company" or "the Group") today announces its preliminary results for the year ended 31 December 2016.
2016 Highlights
-- Revenue decreased as anticipated to GBP2.4m (2015: GBP5.8m) -- Adjusted EBITDA* loss GBP2.0m significantly improved (2015: GBP6.0m) -- Exceptional tangible fixed assets impairment charge of GBP4.1m (2015: GBP9.6m) -- Loss from operating activities GBP7.3m (2015: GBP17.9m loss) -- Loss before taxation GBP8.9m (2015: GBP18.9m loss) -- Loss per share decreased to 3.03p (2015: loss 8.91p) -- Cash GBP2.4m (2015: GBP3.6m, of which GBP1.3m restricted (per note 9)) -- Net debt GBP5.5m (2015: net debt GBP5.4m)
-- Immediately prior to release of these results, capital and interest payments holiday agreed on debt for period July 17 through to April 18 inclusive
*Adjusted EBITDA is EBITDA before exceptional items and share-based payment charges
The Board is currently continuing its discussions with its primary lender concerning amendments to the Group's capital structure and funding.
Chris Errington, Executive Chairman, commented:
"Following a comprehensive strategic business review in early 2016 we have now executed the first stage of our strategy and successfully stabilised the Group's operations. Alongside, and critical to, this we have also improved our short-term financial stability through the support of our lender by way of a debt capital and interest payments holiday.
Coming into 2017, our plans were to engage in a limited number of Events deployments, which we have done, and also to progress Semi-Permanent V1 room opportunities for first deployment in the last quarter of 2017, a plan that remains on track.
Over the past few months we have made good commercial progress with Semi-Permanent sales opportunities that were first qualified in the second half of 2016. During 2017 we have also made good progress in qualifying a number of new deployment opportunities both in the Events and Semi-Permanent markets. The first of these newly identified and qualified opportunities in the Events market has already been secured in June 2017 for July 2017 deployment. Our key focus is to repeat this success by closing out further qualified sales opportunities in the second half of 2017 and on into 2018."
The Company's audited Annual Financial Statement for the year ended 31 December 2016 will be available on the Company's website shortly and be posted to shareholders before the end of June along with notice of the Company's Annual General Meeting. An update will be provided in due course.
Enquiries:
Hot Features
Premium
Panmure Gordon 020 7886 2500
Corporate Finance: Andrew Godber
Duncan Monteith
Corporate Broking: Charles Leigh-Pemberton
STRATEGIC REPORT
The Directors present their Strategic Report for the year ended 31 December 2016. The Strategic Report comprises the:
-- Chairman's Statement; and -- Operating and Financial Review.
Chairman's Statement
Over the past few years, Snoozebox has established itself as a leading provider of rapidly deployed quality accommodation. In early 2016, the Board commenced a restructuring of the Group's operations intended to improve operating stability, financial performance and position.
We have made good progress in reducing the Group's cost burden and stabilising operations, as further set out in the Operating and Financial Review. We have also made good progress in identifying deployment opportunities for our V1 accommodation as set out in Current Trading and Outlook section below.
Business Strategy and Position of the Business
-- Accommodation Assets. The Group has a good stock of differentiated and viable accommodation assets and access to a reasonable market for those assets. The Group is focussing on placing existing accommodation assets into the market with an aim of generating sufficient revenues to at least cover overheads and contribute towards servicing debt in the medium-to-long term. The Group's room stock assets for hire comprise:
o Possession of and access to 570 V1 containerised rooms (V1 rooms), all of which are owned by a third-party provider of asset finance and leased by the Group as described further at note 20 to the financial statements. Each V1 room is ensuite and can sleep at least two adults; and
o Ownership of 200 Snoozy pop-up rooms, each of which can sleep at least two adults.
-- Unique Selling Points. The Group's key differentiator is the ability to rapidly deploy its quality accommodation solutions on a temporary or semi-permanent basis;
-- Semi-Permanent Market. The Semi-Permanent market involves the deployment of V1 rooms for target periods of six months to many years, which the Board considers is most likely to generate the revenue and margins required to achieve the Group's short-to-medium term business objectives. Semi-Permanent deployment also delivers longer term predictable revenues, without the drag of void periods, allowing the high one-off deployment and extraction costs to be absorbed from revenues generated over a longer period. The Group is focussed on Semi-Permanent sales and the execution and timing of new sales to generate revenues in this market will be a critical factor in the achievement of the Group's business objectives;
-- Events Market. The Events market involves the deployment of Snoozy rooms, complemented where there is capacity and demand by V1 rooms, for target periods of days to weeks and generates a modest contribution towards Group objectives. The Events market has longer void periods associated with moving assets from event to event. The related high one-off deployment and extraction costs, means that this market is unlikely to contribute significantly to short or medium-term trading at the Group's current scale. The Group will continue with the Events market where commercially viable, making appropriate use of the Group's accommodation assets and aiming for longer-term deployment periods;
-- Sales Focus. A careful balance of Semi-Permanent and Events deployments is being sought, with a keen focus on ensuring that the Group's key objectives are met in the short-to-medium term;
-- Margins, Costs and Capex. The Group's margins, central overheads and capital expenditure have historically been out of balance with trading and cash generation from operations. The Board is focussed on achieving an appropriate mix of costs, capital and margins to achieve medium to long term objectives. The Board has significantly reduced central overheads during the course of 2016 and entered 2017 with central overhead cash costs now running at approximately GBP0.1m per month as planned. Capital expenditure is being limited in the short-term to appropriate maintenance and replacement expenditure that keeps the existing accommodation stock in good condition. In the medium-to-long term, and where appropriate, we will seek to match expenditure to firm new contracts for deployment; and
-- Funding and debt. The Group has a historical capital structure that involves a significant level of debt that is inconsistent with its current and near term financial performance and position. The Board is currently continuing its discussions with its primary lender options concerning amendments to the Group's capital structure and funding.
Business Objectives
The Group is focused on three key business objectives:
1. In the short-term, establishing a more stable operating environment for the Group and seeking improved financial stability through renegotiating its debt;
2. In the short-to-medium term, achieving net operating cash flows sufficient to cover central overheads and service the Group's debt; and
3. In the medium-to-long term, securing further growth in revenues and operating cash flows from a stable base.
In terms of short-term objectives, significant improvements have been made to the operating environment of the Group in 2016 and through into 2017. Central overheads have also been reduced to the targeted GBP0.1m per month going into 2017, compared to approximately GBP0.4m per month entering 2016. In November 2016, we announced an amendment to the Group's debt servicing obligations which reduced the short-term debt repayment burden whilst also reducing the overall balance outstanding through use of the Group's cash then held in escrow. Constructive discussions with our lender are ongoing, as evidenced by the further amendment to the Group's debt servicing obligations secured immediately prior to the date of this report.
In the short-to-medium term, the Group is engaged in sales activities aimed at securing Semi-Permanent deployments of V1 rooms. Several good opportunities for deployment of V1 rooms have been qualified and we are now at various stages of negotiation with landlords and customers for deployment. Securing one or more of these opportunities for 80 V1 rooms alongside existing revenues would provide a good contribution towards achieving cash flow break even at an operational level (pre-debt servicing and capital expenditure) and, with time for the deployments to mature and to secure further wins, help the Group become cash generative in the medium term.
In the medium-to-long term, the Board believes that the Group has several growth options available to it, including repetition of a revised and working business strategy with similar assets, production of new assets backed by a more predictable revenue pipeline, entry into new markets or a combination of these. Until the Group has made appropriate progress towards its objectives of stability and achieving operating cash flow breakeven, the Board will approach any such medium to long term growth plans cautiously.
Business Model
The Group earns revenue from the provision of rapidly deployed quality accommodation to customers in three main ways:
1. Hire of accommodation stock to a customer for them to operate as a service for their end customers (a "dry hire"). The customer is responsible for operating the rooms and for room occupancy through its own sales efforts. The Group typically secures a fixed element of committed revenue for the deployment period and may secure an additional variable element depending on commercial factors;
2. Hire of accommodation stock to a customer where the Group is responsible for operating the accommodation as a service to end customers (a "managed service"). The Group is responsible for operating the accommodation and the responsibility for room occupancy falls into two models:
o The Group is responsible for room occupancy through its own sales efforts; or
o The customer is responsible for room occupancy through its own sales efforts;
The revenue stream for both models is generally variable depending on occupancy and room rates achieved and may include a fixed element in the latter customer model; and
3. Lease or license of land by the Group on which to deploy and then operate the Group's accommodation assets as a service to end customers (a "hotel" style deployment). The Group is responsible for all aspects of operating the hotel, although it may sub-contract some or all obligations to third parties.
The Group can earn further revenues from each deployment through provision of additional services, such as food and drink, and these additional services, when managed well, can be a valuable source of additional margin in the right environment.
The Group's preferred model is for longer term hire or deployment of the Group's room stock, targeting hire or deployment periods of three years or more.
Formal planning permission may be required for longer-term deployments, depending on the circumstances, and where granted may have specific covenants or conditions attached. Planning applications introduce delay into the sales cycle. New deployments involve a significant cash outflow covering transportation, site preparation and installation together with any ancillary capital expenditure required to complement a new deployment. The level of such set-up expenditure can be material.
Funding and going concern
Funding
The Group initiated discussions with its primary lender in April 2016 seeking an amendment to its debt servicing obligations. In November 2016, the Group announced amendments to its debt servicing obligations, the details of which are set out in note 20. As reported in note 2 to the financial statements, the Group remains in constructive discussions with its primary lender, concerning repayment obligations and longer-term capital structure, and they remain supportive of the Directors' strategy and plans. Throughout 2016 the Group paid all of its debt repayment obligations as they fell due and has continued to do so to the date of this report, taking into account the changes introduced by the November 2016 amendment.
Immediately prior to the date of this report, the Board agreed a debt capital and interest repayment holiday with its lender in respect of the four quarterly payments due in July 17 to April 18 inclusive as set out in note 2.
The Board will provide further updates on these discussions in due course.
Going concern
After making enquiries and taking account of the Group's cash resources, future trading prospects, an agreement with the primary lender for a four quarter debt capital and interest repayment holiday and ongoing supportive discussions with the primary lender regarding capital structure, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the next 12 months and, for this reason, they continue to adopt the going concern basis in preparing the financial statements. Note 2 to the financial statements provides further information concerning the assumptions made by the directors in forming their view and should be read in conjunction with this statement.
Board Changes
The Board's composition changed significantly in 2016 since my initial appointment as a Non-Executive Director in January 2016. In February 2016, the then Chairman and a Non-Executive director resigned, at which time I became Non-Executive Chairman, followed in April 2016 by the resignation of the CEO, at which time I became Executive Chairman. The Board now comprises myself and two other Non-Executives.
Current Trading
Trading in the new financial year to 30 April 2017 has been in line with the Board's expectations with an unaudited unadjusted EBITDA loss of approximately GBP0.4m (unaudited 4 months to 30 April 2016: GBP0.5m loss). In general, and as a result of the operational changes implemented in 2016, we are seeing an early trend of increased underlying contribution to central overheads from deployments both in the Semi-Permanent and Events divisions.
Semi-Permanent
We are in the final stages of agreeing a renewal of the Group's Semi-Permanent deployment in Cornwall and anticipate remaining on site for a number of years to come. We remain deployed and operational in Cornwall in the meantime.
We have identified and qualified several opportunities in the UK for deployment of our Semi-Permanent V1 accommodation. A number of these are now entering final commercial negotiations which, if successfully concluded, should see deployments commencing in the fourth quarter of 2017 (consistent with our plans) and on into 2018. The Board has assumed that any such opportunities will not generate material new revenues (or contribution to central overheads) until at least 2018.
Events
In June 2017, we will have completed two deployments of accommodation to the UK Events market, generating revenues of approximately GBP0.7m and an underlying anticipated contribution to central overheads of approximately GBP0.1m. Guest feedback so far has been excellent for which my thanks go to our loyal and hard-working operations team. We continue to assess Event attendance on its commercial merits and the Board expects to remain involved in this market going forward
I am pleased to report that in June 2017 we entered into a contract for the July 2017 deployment of a number of our Snoozy rooms to a new customer in the sports and leisure industry, where we expect to generate a small but valuable contribution. We are actively looking to repeat this type of contract for provision of Snoozies going forward.
Central overheads are now running at approximately GBP0.1m per month, capital expenditure has been minimised and the Group continues to incur appropriate maintenance and replacement expenditure to keep the existing accommodation in good condition.
The Group's unaudited net debt at 30 April 2017 was approximately GBP6.6m, comprising GBP8.5m debt and GBP1.9m of cash and cash equivalents (31 December 2016: GBP5.5m net debt).
Outlook
Following a comprehensive strategic business review in early 2016 we have now executed the first stage of our strategy and successfully stabilised the Group's operations. Alongside, and critical to, this we have also improved our short-term financial stability through the support of our lender by way of a debt capital and interest payments holiday. The Group remains in constructive discussions with its primary lender, concerning repayment obligations and longer-term capital structure, and they remain supportive of the Directors' strategy and plans.
From this platform of relative stability, we are now much better placed to execute the second phase of our strategy - that of securing longer-term deployment opportunities for our accommodation to earn target revenues and margins that will over time cover central overheads
Coming into 2017, our plans were to engage in a limited number of Events deployments, which we have done, and also to progress Semi-Permanent V1 room opportunities for first deployment in the last quarter of 2017, a plan that remains on track.
Over the past few months we have made good commercial progress with Semi-Permanent sales opportunities that were first qualified in the second half of 2016. During 2017 we have also made good progress in qualifying a number of new deployment opportunities both in the Events and Semi-Permanent markets. The first of these newly identified and qualified opportunities in the Events market has already been secured in June 2017 for July 2017 deployment. Our key focus is to repeat this success by closing out further qualified sales opportunities in the second half of 2017 and on into 2018.
I look forward to reporting progress towards securing new deployments in 2017 and beyond.
Chris Errington
Executive Chairman
29 June 2017
Operating and Financial Review
Operating performance table
The following tables summarise the Group's operating performance:
Revenue-based performance 2016 2015 Variance
--------------------------- ------ ------ -------------
GBPm GBPm GBPm %
--------------------------- ------ ------ ------ -----
Semi-Permanent 1.4 4.0 (2.6) -65%
--------------------------- ------ ------ ------ -----
Events 1.0 1.8 (0.8) -44%
--------------------------- ------ ------ ------ -----
Total revenue 2.4 5.8 (3.4) -59%
--------------------------- ------ ------ ------ -----
Gross profit 2.0 3.3 (1.3) -39%
--------------------------- ------ ------ ------ -----
Logistics, deployment and
equipment hire (1.3) (3.6) (2.3) -64%
--------------------------- ------ ------ ------ -----
Contribution to central
overheads 0.7 (0.3) 1.0
--------------------------- ------ ------ ------ -----
Earnings-based performance 2016 2015 Variance
----------------------------- ------- ------- --------------
GBPm GBPm GBPm %
----------------------------- ------- ------- ------ ------
Statutory loss before tax
as reported (8.9) (18.9) 10.0 -53%
----------------------------- ------- ------- ------ ------
Adjustment for exceptional
items (note 7 to financial
statements) 4.4 9.9 (5.5) -56%
----------------------------- ------- ------- ------ ------
Adjusted loss before tax (4.5) (9.0) 4.5 -50%
----------------------------- ------- ------- ------ ------
Net interest payable 1.6 1.0 0.6 60%
----------------------------- ------- ------- ------ ------
Depreciation 1.0 1.9 (0.9) -47%
----------------------------- ------- ------- ------ ------
Share-based payments charge (0.1) 0.1 (0.2) -200%
----------------------------- ------- ------- ------ ------
Adjusted EBITDA (2.0) (6.0) 4.0 -67%
----------------------------- ------- ------- ------ ------
Loss after tax as reported (8.9) (18.9) 10.0 -53%
----------------------------- ------- ------- ------ ------
Basic and diluted earnings
per share (pence) (3.03) (8.91) 5.9 -66%
----------------------------- ------- ------- ------ ------
Total revenue decreased as anticipated to GBP2.4m (2015: GBP5.8m) as the Falklands Semi-Permanent deployment came to an end and we focussed on a lower number of Event deployments. During the year, the Group continued to provide its 58 V1 rooms at an attraction in Cornwall, which operates on a dry hire basis operated by a third party.
Contribution to central overheads improved significantly as we began controlling costs better and avoiding uncommercial deployments, whilst also benefitting from the tail end of the Semi-Permanent Falklands deployment and ongoing deployment in Cornwall. Total contribution to central overheads improved by GBP1.0m, with GBP0.7m profit in the year (2015: GBP0.3m loss).
The Semi-Permanent division returned a contribution to central overheads of GBP0.8m for the year (2015: GBP1.2m contribution) which reflects the ongoing profitable nature of such deployments, impacted by the end of our deployment in the Falklands in the first half 2016.
The Events division returned a contribution to central overheads of GBP0.1m loss (2015: GBP1.4m loss), which whilst an improved performance suffered from an excessive direct cost base and the turmoil of a group restructuring undertaken at peak deployment time.
We commenced a reduction in the central overhead cost base in the first half of 2016 which reduced costs going into the second half of 2016 but for which the full benefit will only be seen in 2017. As a measure of underlying trading, adjusted EBITDA improved GBP4.0m to a loss of GBP2.0m in the year (2015: GBP6.0m loss). Cost reductions were made in all areas of the business, including: reducing headcount through a structured redundancy programme, reducing Board numbers and costs and removing or re-negotiating non-essential expenditure in all areas.
The Group's depreciation charge reduced in line with lower capital expenditure and the impairment charge in 2015 to a charge of GBP1.0m (2015: GBP2.0m).
Exceptional costs totalled GBP4.4m for the year (2015: GBP9.9m exceptional costs), as explained further in note 7 to the financial statements. The largest exceptional cost in 2016 was a GBP4.1m non-cash impairment charge (2015: GBP9.6m non-cash impairment charge) recorded against the carrying value of the Group's tangible fixed assets, further details of which are provided in note 11 to the financial statements. The impairment charge for 2016 arose largely from an experience based reduction in the likely future cash contribution achievable from the V1 rooms. We now believe that a certain degree of managed services is likely to be required for all deployments, reducing the contribution and net cash inflows available from the V1 stock of rooms (compared with our initial modelling) which in turn gives rise to an increased impairment on a value in use basis.
Finance expenses increased as a result of a one-off GBP0.5m expense associated with the re-measurement of the finance lease liability as described in note 16.
Cash flows
The Group's net cash outflow from operating activities improved in the year to GBP3.1m outflow (2015: GBP7.2m outflow) because of the improved trading performance offset by the negative impact of a working capital reversal with a net outflow to reduce payables.
The Group's cash outflows from investing activities reduced significantly as we curtailed the new asset investment programmes, which featured in 2015, and disposed of surplus equipment. As a result, there was a small net cash inflow (from disposals) in 2016 compared to the GBP4.4m outflow in 2015.
In January 2016, the Group completed a new equity placing to raise GBP4.5m net of expenses.
The Group serviced the capital element of its debt with a cash outflow to finance lease creditors of GBP1.9m in the year (2015: GBP0.8m). The cash outflow increase includes a payment of GBP1.3m of restricted cash to repay debt as part of the amendment agreed in November 2016 as detailed in Note 20.
The Group ended the year with GBP2.4m of cash (2015: GBP2.3m) and no restricted cash (2015: GBP1.3m).
Funding and net debt
On 2 September 2014, the Group entered a sale and leaseback arrangement whereby it sold its V1 portable rooms to third party provider of asset finance and leased them back for a primary term of 7.5 years, with secondary periods available. The assets under lease included 578 rooms in the amount of GBP10m, which was drawn down in full on 24 October 2014.
Net debt at 31 December 2016 was GBP5.5m (2015: GBP5.4m net debt). Further information concerning the Group's cash and debt position can be found in notes 16, 20 and 22 to these financial statements.
Taxation
The Group has incurred significant trading losses in the current and prior year and as a result, no corporation tax charge has been made in the current or prior year.
At 31 December 2016, the Group had gross unrecognised tax losses carried forward for offset against future trading profits of approximately GBP24m (2015: GBP20m) and gross unrecognised deferred capital allowances of approximately GBP6m (2015: GBP6m). As a result, the Group is unlikely to pay corporation tax in the short to medium term. No deferred tax assets have been recognised because of the uncertainty over the timing of any likely recovery.
Principal risk and uncertainties
As described in the Chairman's Statement section of this Strategic Report, the Group earns revenue from the provision of accommodation to customers.
The Board recognises that there are a number of risk factors that have the potential to adversely affect the Group's execution of its strategic plan and, more generally, the Group's operations, its financial performance or the value of its equities.
The Directors have carried out an assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. A description of those risks and an explanation of how they are being managed or mitigated is set out below.
Adequacy of funding / liquidity and going concern
Impact on Group Assessment of Mitigation of
change in risk risk
in year
------------------------- ------------------------ --------------------------
As referred to The Group has The Board has
in the Strategic reduced its central begun executing
Report: The Group overheads and against the revised
has historically capital expenditure strategy set
been loss making to a significantly out in 2016 and
with negative lower level than is now at the
cash flows and 2015 and also key stage of
this trend has stabilised operations. finalising negotiations
so far continued During 2016, for deployment
into 2017 albeit negotiations of its V1 accommodation.
on an improved with the primary The Board has
basis; and The lender allowed commenced constructive
Group has a significant for a significant discussions with
debt burden and portion of the the Group's primary
a net debt financial debt to be repaid lender concerning
position. Failure with cash held potential amendments
to improve trading by the Group to the capital
significantly in escrow (and structure of
in the short therefore of the Group.
to medium term no operational Note 2 to the
would raise doubts use to the Group). financial statements
as to the adequacy This reduces provides further
of funding, liquidity the debt outstanding information concerning
and ultimately and future interest adequacy of funding,
the Group's ability payable. liquidity and
to service debt going concern.
and continue
as a going concern.
------------------------- ------------------------ --------------------------
Failure to grow new revenues
Impact on Group Assessment of Mitigation of
change in risk risk
in year
---------------------- -------------------- ---------------------------
Growing new revenues Stabilisation Additional strategic
is critical to of the Group's focus is being
achieving the operations has placed on the
Group's key business improved the markets and accommodation
objectives. A chances of winning assets that the
failure to grow new opportunities Board believes
new revenues for deployment. have the highest
either to the potential to
target levels grow new higher
required or where margin revenues.
they are delayed The cost base
further into and capital expenditure
the future than has been significantly
planned, would reduced, consistent
jeopardise the with delivery
Group's ability of the Group's
to deliver against overall objectives
its business whilst balancing
objectives. the delivery
of a quality
guest experience.
We have identified
a number of partners
to assist with
our operational
activity and
securing new
sales that should
help mitigate
this risk.
---------------------- -------------------- ---------------------------
Failure to control operational risks
Impact on Group Assessment of Mitigation of
change in risk risk
in year
----------------------- -------------------- -----------------------
Operational risks This risk increased In 2016 and on
to be managed during 2015 as into 2017, the
include: project the Group expanded Board has made
risk (controlled its operations. changes to mitigate
delivery of new During 2016 and this risk through
and existing into 2017, the a clear strategic
projects), deployment operational risk focus on business
(and extraction) profile decreased objectives and
risk and customer as controls were improvement in
service risk put in place operations, including
(guest experience). and operations the use of preferred
Failure to control stabilised. contractors.
these risks would
have a negative
impact on the
Group's ability
to deliver against
its business
objectives either
because planned
cash flows would
be reduced or
the potential
to earn revenues
from guests would
be adversely
affected.
----------------------- -------------------- -----------------------
Failure to respond to market risks and competition
Impact on Group Assessment of Mitigation of
change in risk risk
in year
---------------------- ---------------- ---------------------
There is a risk This risk has The Group continues
that the market not changed in to focus on,
for the Group's the year. and invest in,
product declines its key market
or that competition and competitive
increases, reducing differentiators
the ability to of: (1) the ability
win work at all, to rapidly deploy
or at appropriate accommodation
margins. Failure to satisfy customer
to control this requirements
risk will have and (2) provide
an adverse impact accommodation
on the Group's that is at the
ability to deliver upper end of
against its business the quality and
objectives. standard available
from competitors.
---------------------- ---------------- ---------------------
The Strategic Report was approved by the Board of Directors and was signed on its behalf by:
Chris Errington
Executive Chairman
29 June 2017
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Note Year ended Year ended
31 Dec 31 Dec
2016 2015
GBP'000 GBP'000
-------------------------------- ----- ----------- -----------
REVENUE 4 2,416 5,821
Cost of sales (401) (2,517)
GROSS PROFIT 2,015 3,304
Logistics, deployment and
equipment hire (1,295) (3,557)
CONTRIBUTION TO CENTRAL
OVERHEADS 4 720 (253)
Administrative expenses (8,064) (17,647)
ADJUSTED EBITDA (2,024) (5,960)
Exceptional items - impairment
and restructuring costs 7 (4,400) (9,910)
Depreciation 11 (1,004) (1,962)
Equity-settled share-based
payment credit / (charge) 84 (68)
-------------------------------- ----- ----------- -----------
LOSS FROM OPERATING ACTIVITIES 5 (7,344) (17,900)
Finance income 8 10 25
Finance expenses 8 (1,581) (1,009)
LOSS BEFORE TAXATION (8,915) (18,884)
Taxation 9 - -
LOSS AND TOTAL COMPREHENSIVE
INCOME FOR THE YEAR (8,915) (18,884)
Loss per share - basic
and diluted (pence) 10 (3.03)p (8.91)p
Gross profit Profit after hotel operation
costs have been deducted from
revenue
Contribution to Profit / (loss) after logistics,
central overheads deployment and equipment hire
have been deducted from gross
profit
Adjusted EBITDA Earnings before interest, tax,
depreciation and amortisation
and before exceptional costs
and equity-settled share-based
payment charges
Consolidated Statement of Financial Position
As at 31 December GROUP
2016
--------------------
Note 2016 2015
GBP'000 GBP'000
--------------------------- ----- --------- ---------
ASSETS
NON-CURRENT ASSETS
Property, plant
and equipment 11 3,477 8,537
Investments 12 - -
--------------------------- ----- --------- ---------
TOTAL NON-CURRENT
ASSETS 3,477 8,537
--------------------------- ----- --------- ---------
CURRENT ASSETS
Trade and other
receivables 14 326 1,527
Restricted cash
and cash equivalents 22 - 1,281
Cash and cash equivalents 22 2,360 2,345
--------------------------- ----- --------- ---------
TOTAL CURRENT ASSETS 2,686 5,153
--------------------------- ----- --------- ---------
TOTAL ASSETS 6,163 13,690
--------------------------- ----- --------- ---------
LIABILITIES
CURRENT LIABILITIES
Trade and other
payables 15 787 2,805
Loans and borrowings 16 368 1,097
--------------------------- ----- --------- ---------
TOTAL CURRENT LIABILITIES 1,155 3,902
--------------------------- ----- --------- ---------
NON-CURRENT LIABILITIES
Provisions 15 80 -
Loans and borrowings 16 7,526 7,911
--------------------------- ----- --------- ---------
TOTAL NON-CURRENT
LIABILITIES 7,606 7,911
--------------------------- ----- --------- ---------
TOTAL LIABILITIES 8,761 11,813
--------------------------- ----- --------- ---------
TOTAL NET (LIABILITIES)
/ ASSETS (2,598) 1,877
--------------------------- ----- --------- ---------
EQUITY
Share capital 17 2,952 2,119
Share premium 40,700 37,009
Other reserve 718 718
Merger reserve - -
Retained earnings (46,968) (37,969) TOTAL (DEFICIT) / EQUITY (2,598) 1,877 --------------------------- ----- --------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
GROUP
--------------------
Note 2016 2015
GBP'000 GBP'000
----------------------------------- ----- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss before taxation for
the year (8,915) (18,884)
Depreciation 1,004 1,962
Fixed asset impairment
charge 7 4,085 9,560
Equity-settled share-based
payment adjustment (84) 68
Net finance expenses 1,570 984
Decrease / (increase) in
inventories - 26
(Increase) in trade and
other receivables 1,210 (151)
(Decrease) / increase in
trade and other payables (2,032) (725)
Increase in provisions 80 -
----------------------------------- ----- --------- ---------
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (3,082) (7,160)
----------------------------------- ----- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Interest received 10 25
Payments to acquire property,
plant and equipment (29) (4,387)
Receipts from disposal 31 -
of property, plant and
equipment
----------------------------------- ----- --------- ---------
NET CASH GENERATED FROM
/ (USED IN) INVESTING ACTIVITIES 12 (4,362)
----------------------------------- ----- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issue of equity shares 4,524 -
net of issue costs net
of issue costs
Interest paid (866) (961)
Repayment of finance lease
creditors (1,854) (804)
----------------------------------- ----- --------- ---------
NET CASH GENERATED FROM
/ (USED IN) FINANCING ACTIVITIES 1,804 (1,765)
----------------------------------- ----- --------- ---------
NET (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,266) (13,287)
Cash and cash equivalents
at beginning of year 3,626 16,913
CASH AND CASH EQUIVALENTS
AT OF YEAR 22 2,360 3,626
----------------------------------- ----- --------- ---------
A cash flow statement has not been prepared for the Company as the Company does not have a bank account; all cash amounts in respect of the Company are received or paid by its subsidiary and recharged via the inter-company account.
The accompanying accounting policies and notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2016
GROUP Called Share Other Retained Total
up share premium reserve earnings equity
capital GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
----------------------- ---------- --------- --------- ---------- ---------
AT 31 DECEMBER
2014 2,119 37,009 718 (19,153) 20,693
Loss and total
comprehensive income
for the year - - - (18,884) (18,884)
Equity-settled
share-based payment
credit - - - 68 68
----------------------- ---------- --------- --------- ---------- ---------
AT 31 DECEMBER
2015 2,119 37,009 718 (37,969) 1,877
Loss and total
comprehensive income
for the year - - - (8,915) (8,915)
Equity-settled
share-based payment
debit - - - (84) (84)
Issue of new equity
shares 833 4,167 - - 5,000
Share issue costs - (476) - - (476)
AT 31 DECEMBER
2016 2,952 40,700 718 (46,968) (2,598)
----------------------- ---------- --------- --------- ---------- ---------
Notes to the preliminary financial information for year ended 31 December 2016
1.General information
Snoozebox Holdings plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange. This preliminary announcement was authorised for issue by the Board of Directors on 29 June 2017. The basis of preparation of this preliminary announcement is set out below.
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 2016, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts: their reports on the years ended 31 December 2015 and 31 December 2016 were not qualified but did both draw attention by way of an emphasis of matter to a material uncertainty related to the Group and Company's ability to continue as a going concern.
The following emphasis of matter paragraph has been extracted, unedited, from the Independent Auditors' Report on the financial statements for the year ended 31 December 2016:
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 2 to the financial statements concerning the group and company's ability to continue as a going concern. The Directors have prepared forecasts of the group's cash flows which indicate that the group will be able to operate within the facilities expected to be available to it. The forecasts assume that the directors will reach formal agreement with the finance company which owns the major fixed assets of the group to defer certain cash flows due under the existing arrangement between the parties. In addition the forecasts include assumptions on turnover and costs which may not be achieved, in which case further funding would be required. The Directors are confident of being able to achieve the forecasts and reach formal agreement with the finance company, however there can be no guarantee that these will be met. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company was unable to continue as a going concern.
Neither the audit report for the year ended 31 December 2015 nor that for the year ended 31 December 2016 contained statements under s498 (2) or (3) of the Companies Act 2006.
The financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRSs) but it does not comply with all of the disclosure requirements in IFRSs. The accounting policies used in the preparation of this financial information included in this preliminary announcement are consistent with those that have been applied in the Company's audited financial statements for the years ended 31 December 2016 and 2015.
Certain note numbers referred to in this preliminary announcement relate to the full audited annual financial report.
Copies of this announcement can be obtained from the Company's registered office at 60 Trafalgar Square, London, WC2N 5DS.
The full financial statements which comply with IFRSs and have been audited will be posted to shareholders before the end of June 2017, are available to members of the public at the registered office of the Company from that date and will be available shortly on the Company's website: www.snoozebox.com.
2.Going concern basis
The following going concern basis section has been extracted in unedited format from note 2 to the financial statements for the year ended 31 December 2016:
Going concern basis
The Directors are required to report whether the business is a going concern, with supporting assumptions and qualifications as necessary.
The Group's business activities, recent trading performance, net debt position, cash flows and principal risks and uncertainties are described in the Operating and Financial Review section of the Strategic Report. In light of these factors the Directors have performed a detailed review of the Group's ability to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report, to determine whether it is appropriate to continue to adopt the going concern basis in preparing these financial statements.
Forecasts, assumptions and sensitivities
The Directors have prepared detailed cash flow forecasts for the five years to 31 December 2021 based on their current expectations of trading prospects, likely contract wins and cost efficiencies arising from the new strategic focus described in the Chairman's Statement section of the Strategic Report. These forecasts take account of reasonably possible changes in trading performance and cash flows.
The Directors believe that the critical assumptions inherent in these cash flow forecasts are:
-- New customers. The primary source of new sales is forecast to be the Semi-Permanent division and the Directors anticipate deploying the majority of existing V1 room assets on a Semi-Permanent basis in a gradual and phased manner commencing in the second half of 2017 and continuing through to 31 December 2021, earning revenues and margins sufficient to cover the cash outflows associated with central overheads and lower levels of capital expenditure;
-- Debt servicing and levels. The Directors continue to have constructive discussions with the primary lender concerning the level of debt and the repayment profile. In the short term and by concession with rights reserved, the primary lender has (immediately prior to the date of this report) agreed not to enforce the quarterly capital and interest payment obligations for July 2017 through to and including April 2018 (totalling GBP1.7m). This recent concessionary change is in addition to, and modifies, the debt amendment of November 2016. In addition, both parties have commenced discussions concerning the longer-term capital structure of the Group, which if successfully concluded would result in a more sustainable long-term capital structure for the Group in its restructured form; and
-- Central overheads. The Directors have assumed that central overheads will be contained to approximately GBP0.1m per month, reducing slightly as existing and committed property operating leases expire.
The Directors have performed a sensitivity analysis on the forecast assumptions and determined the forecast is most sensitive to the assumptions concerning new customers and debt servicing / level, as follows:
-- Deployment of the existing V1 room assets is planned to commence in the 4(th) quarter of 2017, initially with 80 rooms deployed earning revenues from that point with rooms deployed increasing in a phased manner moving into 2021. The Directors estimate that, in the absence of other corrective action, the effect of a delay in the deployment dates, and resulting revenue flows, for V1 accommodation deployment in the forecast by 3 months would necessitate access to new funding in early 2018; and
-- The forecasts are fundamentally sensitive to: (1) the quarterly capital and interest payment holiday impacting July 2017 through to and including April 2018 remaining in place and not being withdrawn and (2) a successful conclusion of discussions with the primary lender concerning a suitable longer-term capital structure. A change to the existing capital structure and debt servicing obligations, once the four quarter repayment holiday ends, is required for the Group to continue as a going concern. In forming their overall going concern conclusion, the Directors have assumed that the quarterly payment holiday will apply for the stated four quarters as agreed and that in the longer-term the parties will agree an appropriate capital structure for the Group to resolve the existing and significant level of debt and reduce future obligations to a sustainable level. If the agreement for a full four quarter payment holiday is reversed at any point (other than against increased revenue from Semi-Permanent deployment of V1 rooms) then this event would cast significant doubt on the Group's ability to continue as a going concern.
Other matters considered
The Directors have, amongst other matters, also taken into account the following in forming their conclusions on the going concern assumption:
-- Execution of new sales will be the key factor in the achievement of objectives. The current level of qualified Semi-Permanent sales opportunities is good;
-- The Group is in constructive discussions with its primary lender, who remains supportive of the Directors' strategy and plans. Throughout 2016 the Group paid all of its debt capital and interest payment obligations (as amended by the November 16 debt amendment) as they fell due and has continued to do so to the date of this report;
-- Trading in the new financial year to 30 April 2017 has been in line with the Board's expectations with overheads reduced to the GBP0.1m per month target and operations stabilised;
Conclusion
Whilst there is a material uncertainty which may cast significant doubt about the ability of the Group and Company to continue as a going concern, the Directors have concluded that there is a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report, and that it is appropriate to continue to adopt the going concern basis in preparing these financial statements.
3.Segment information
For management purposes, the Group is organised into the following reportable segments: Events and Semi-Permanent. The Events segment includes all activities providing short-term hotel accommodation at popular events and festivals. The Semi-Permanent segment includes all activities in relation to the provision of long-term managed hotel solutions.
2016 2015
------------------------------------- -------------------------------------
Events Semi-Permanent Total Events Semi-Permanent Total
GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- --------------- --------- --------- --------------- ---------
REVENUE 1,000 1,416 2,416 1,783 4,038 5,821
Cost of sales (276) (125) (401) (1,182) (1,335) (2,517)
---------------- --------- --------------- --------- --------- --------------- ---------
GROSS PROFIT 724 1,291 2,015 601 2,703 3,304
Logistics,
deployment
and equipment
hire (838) (457) (1,295) (2,037) (1,520) (3,557)
---------------- --------- --------------- --------- --------- --------------- ---------
CONTRIBUTION
TO CENTRAL
OVERHEADS (114) 834 720 (1,436) 1,183 (253)
---------------- --------- --------------- --------- --------- --------------- ---------
In 2016, revenues from a single customer totalled GBP1.2m which is reported in the Semi-Permanent segment (2015: GBP3.2m from a single customer reported in the Semi-Permanent segment).
Geographical segments
Revenue and non-current assets by geographical area are as follows:
Revenue Non-current
assets
-------------------- --------------------
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- ---------
United Kingdom 1,201 2,592 3,477 7,403
Rest of the World -
South Atlantic 1,215 3,229 - 1,134
Total 2,416 5,821 3,477 8,537
--------------------- --------- --------- --------- ---------
For the purposes of the analysis of revenue, geographical markets are defined as the country or area in which the service is provided. Non-current assets are allocated based on their location as at the period end.
4.Exceptional items
GROUP
--------------------
2016 2015
GBP'000 GBP'000
--------------------------------- --------- ---------
Reorganisation costs 350 350
Profit on disposal of tangible (35) -
fixed assets
Tangible fixed asset impairment
charge 4,085 9,560
Exceptional charge 4,400 9,910
--------------------------------- --------- ---------
5.Loss per share
GROUP
--------------
2016 2015
------------------------------------ ------ ------
Loss per share (basic and diluted)
- pence 3.03p 8.91p
------------------------------------ ------ ------
Loss per 2016 2015
share
--------------------------------- ---------------------------------
Loss Weighted Loss Loss Weighted Loss
GBP'000 average per GBP'000 average per
number share number share
of shares of shares
--------------- --------- ------------ -------- --------- ------------ --------
Loss per
share (basic
and diluted) (8,915) 294,032,574 (3.03)p (18,884) 211,840,727 (8.91)p
--------------- --------- ------------ -------- --------- ------------ --------
All share options have been excluded when calculating the diluted EPS in both 2016 and 2015 as they were anti-dilutive.
6.Property, plant and equipment
GROUP Hotel Hotel IT Equipment Motor Total
Rooms Furniture GBP'000 Vehicles GBP'000
GBP'000 & Equipment GBP'000
GBP'000
-------------------------- --------- ------------- ------------- ---------- ---------
Cost
AT 31 DECEMBER
2014 20,312 1,586 203 245 22,346
Additions 4,156 194 30 8 4,388
AT 31 DECEMBER
2015 24,468 1,780 233 253 26,734
Additions 16 13 - - 29
Disposals - - - (92) (92)
-------------------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2016 24,484 1,793 233 161 26,671
-------------------------- --------- ------------- ------------- ---------- ---------
Accumulated depreciation
AT 31 DECEMBER
2014 5,698 781 90 106 6,675
Charge for the
year 1,606 242 52 62 1,962
Impairment charge 9,068 400 48 44 9,560
-------------------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2015 16,372 1,423 190 212 18,197
Charge for the
year 843 104 17 40 1,004
Impairment charge 3,969 103 13 - 4,085
Disposals - - - (92) (92)
-------------------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2016 21,184 1,630 220 160 23,194
-------------------------- --------- ------------- ------------- ---------- ---------
Net book value
-------------------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2016 3,300 163 13 1 3,477
-------------------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2015 8,096 357 43 41 8,537
-------------------------- --------- ------------- ------------- ---------- ---------
The net book value of assets held under finance leases included in the table above is as follows:
GROUP Hotel Hotel IT Equipment Motor Total
Rooms Furniture GBP'000 Vehicles GBP'000
GBP'000 & Equipment GBP'000
GBP'000
---------------- --------- ------------- ------------- ---------- ---------
Net book value
---------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2016 2,150 2 - - 2,152
---------------- --------- ------------- ------------- ---------- ---------
AT 31 DECEMBER
2015 5,274 7 - 37 5,318
---------------- --------- ------------- ------------- ---------- ---------
Impairment of property, plant and equipment
The Directors have carried out impairment testing of the recoverable amount of property, plant and equipment following indicators of impairment arising from the Group's trading performance and financial position in 2016. As a result of this review, an impairment loss of GBP4.09m has been recognised in the financial statements for 2016 (2015: GBP9.56m).
Carrying value
For the purposes of this impairment testing, the Directors have identified the property, plant and equipment directly attributable to each CGU and that generate cash flows for that CGU largely independent of other assets. These assets primarily comprise the Hotel class of assets within property, plant and equipment.
Corporate assets are those property, plant and equipment assets that do not themselves generate independent cash inflows, but instead act to support the Group's CGUs in general. These corporate assets comprise the classes of fittings and equipment, IT equipment and motor vehicles and have been allocated to each CGU weighted by the relative number of rooms. The allocation of these corporate assets to CGUs has been performed based on the weighting of room numbers available within each CGU, which the Directors believe is a reasonable basis for the purpose of impairment testing.
The following table summarises the carrying amount of the Group's property, plant and equipment within each CGU, the allocation of corporate assets, recoverable amount and resulting impairment charge:
Year ended 31 December Semi-Permanent Events Corporate Total
2016 CGU assets NBV
GBP'000 CGU
GBP'000 GBP'000
GBP'000
------------------------- --------------- --------- ---------- ---------
Carrying value 7,200 70 213 7,483
------------------------- --------------- --------- ---------- ---------
Allocation of corporate
assets to CGUs 213 - (213) -
------------------------- --------------- --------- ---------- ---------
Carrying value 7,413 70 - 7,483
------------------------- --------------- --------- ---------- ---------
Recoverable amount 3,398 - - 3,398
------------------------- --------------- --------- ---------- ---------
Impairment charge (4,015) (70) - (4,085)
------------------------- --------------- --------- ---------- ---------
Year ended 31 December Semi-Permanent Events Corporate Total
2015 CGU assets NBV
GBP'000 CGU
GBP'000 GBP'000
GBP'000
------------------------- --------------- --------- ---------- ---------
Carrying value 15,967 1,197 932 18,096
------------------------- --------------- --------- ---------- ---------
Allocation of corporate
assets to CGUs 695 237 (932) -
------------------------- --------------- --------- ---------- ---------
Carrying value 16,662 1,434 - 18,096
------------------------- --------------- --------- ---------- ---------
Recoverable amount 8,337 199 - 8,536
------------------------- --------------- --------- ---------- ---------
Impairment charge (8,325) (1,235) - (9,560)
------------------------- --------------- --------- ---------- ---------
Working capital balances are excluded from the carrying amounts of each CGU. Where assets are held under finance leases, the finance lease liability has been excluded from the carrying amount and the lease payments excluded from the value in use calculation used to determine the recoverable amount.
Recoverable amount
The CGU recoverable amount has been established by calculating its value in use, which is the present value of the future cash flows expected to be derived from the CGU over future periods. The period in the case of the Events CGU is 5 years whilst that of the Semi-Permanent CGU is 10 years. The 10 year life for the Semi-Permanent CGU has been selected based on the Directors estimate of the economic life of these particular assets, when compared to the assets in the Events CGU, arising from their robust construction. Each future period is discounted back at a discount rate to take account of the time value of money.
The cash flows used in the value in use calculation are based on budgets formally approved by the Board for 2017 to 2019 (2015: 2016 - 2018). Future periods after 2019 are expected to largely repeat 2019 performance. The key assumptions relevant to the Group in establishing the value in use are:
-- Estimated future cash flows. An estimation of the expected future cash flows and, in particular, the timing and quantum of cash inflows from customers, deployment cash outflows and capital expenditure cash outflows, including:
o Only cash inflows from room use (i.e. assuming no additional income from other sources) and cash outflows necessary to generate those future cash inflows and can be directly attributed, or allocated, on a reasonable basis use are considered, including cash outflows to prepare the asset for use (deployment cash outflows), to maintain their current condition and to extract assets from use; and
o Overhead costs relating to the day-to-day servicing of the assets, as well as future overheads costs, are only included to the extent they can be attributed directly, or allocated on a reasonable basis;
-- Discount rate. The discount factor used to establish the value of future cash flows in the forecast period and the terminal period. The Group has applied the Weighted Average Cost of Capital ("WACC") model in establishing a suitable discount rate and risk adjusted the component parts of the WACC to take account of the Group's specific circumstances, including a normalisation of the debt to equity ratio, adding a risk premium to the cost of equity and adjusting to a pre-tax basis; and
-- Growth rates. No growth rates have been applied to the forecast revenues.
A pre-tax discount rate of 19.5% (2015: 19.5%) has been applied to the Semi-Permanent CGU and 20.3% (2015: 20.3%) to the Events CGU cash flows.
Sensitivity analysis
The calculation of recoverable amount is most sensitive to the amount and timing of revenue and discount rate being applied.
The effect of a delay in the deployment dates, and resulting revenue, for V1 accommodation deployment in the forecast by 3 months is to increase the overall impairment by GBP0.7m. The effect of a 1% increase in the discount rate applied is to increase the overall impairment by GBP0.1m.
7.Loans and borrowings
The book value and fair value of loans and borrowings are as follows:
GROUP COMPANY
-------------------- --------------------
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ---------
NON-CURRENT
Finance lease liabilities 7,526 7,911 - -
---------------------------- --------- --------- --------- ---------
7,526 7,911 - -
---------------------------- --------- --------- --------- ---------
CURRENT
Finance lease liabilities 368 1,097 - -
368 1,097 - -
---------------------------- --------- --------- --------- ---------
Total loans and borrowings 7,894 9,008 - -
---------------------------- --------- --------- --------- ---------
The finance lease liabilities are disclosed as current and non-current liabilities based on the finance lease agreements in place at 31 December 2016. No amendments have been made to these disclosures following the concessions made by the primary lender as disclosed in note 2 which had the effect of removing all the obligations falling due within 12 months of the balance sheet date.
Borrowings are shown net of unamortised issue costs of GBP373,000 (2015: GBP443,000) which have been recorded as a reduction in the proceeds of the loan and are being amortised over the term of the facility. The amortisation charged to the Income Statement during the year was GBP70,000 (2015: GBP70,000).
The Group has amended its plans and now anticipates taking up the lease extension option available in the lease. Accordingly, the revised cash flows have been remeasured using the original effective interest rate, leading to an increase in the lease liability and a corresponding finance expense of GBP527,000.
8.Lease commitments - Obligations under finance leases
Obligations under finance leases
Future minimum lease payments and their present value under finance lease agreements were as follows:
GROUP 2016 GROUP 2015
----------------------------------- -----------------------------------
Total Future Capital Total Future Capital
finance interest element finance interest element
lease charges of finance lease charges of finance
GBP'000 GBP'000 lease GBP'000 GBP'000 lease
GBP'000 GBP'000
--------------- --------- ---------- ------------ --------- ---------- ------------
Within 1
year 980 612 368 1,959 863 1,096
Between 1
and 5 years 7,710 1,975 5,735 7,676 2,225 5,451
After 5 years 2,042 251 1,791 2,678 217 2,461
10,732 2,838 7,894 12,313 3,305 9,008
--------------- --------- ---------- ------------ --------- ---------- ------------
The finance lease liabilities are disclosed as current and non-current liabilities based on the finance lease agreements in place at 31 December 2016. No amendments have been made to these disclosures following the concessions made by the primary lender as disclosed in note 2 which had the effect of removing all the obligations falling due within 12 months of the balance sheet date.
Obligations under finance leases are stated net of unamortised arrangement costs of GBP373,000 (2015: GBP443,000).
On 2 September 2014, the Group entered into a sale and leaseback arrangement whereby it sold its first-generation portable hotel rooms to a provider of asset finance (the primary lender) and leased them back for a primary term of 7.5 years with secondary periods available. The assets under lease include 578 rooms in the amount of GBP10,000,000, which was drawn down on 24 October 2014. Snoozebox Limited is the Group's borrowing party.
At initiation, the leaseback arrangement contained the following key terms:
-- a fixed schedule of cash repayments for the term of the agreement; -- an embedded finance rate of 9.5% per annum; and
-- an obligation to maintain a cash balance (an escrow balance) in a bank account managed by the Group charged in favour of the lender for the term of the lease, with GBP1.3m placed into this escrow account attracting a nominal credit interest rate at initiation. This escrow balance has been reported as 'Restricted cash and cash equivalents'. The balance to be retained in escrow was to be calculated following the end of a financial year based on EBITDA performance for that prior year and the prospective EBITDA performance for the next year. Where EBITDA performance fell below a minimum multiple of annual rent payments, additional cash was required to be added to the escrow account, and, where it fell above the minimum, cash was permitted to be withdrawn from the escrow account.
In the first half of 2016, the Group initiated discussions with its primary lender seeking an amendment to its debt servicing obligations. The following amendments were subsequently agreed with the primary lender in November 2016:
-- Debt servicing payments for each of the quarters ending January 2017, April 2017 and July 2017 were reduced to interest only, resulting in quarterly payments due of GBP0.18m per quarter. The total payable over these three quarters was reduced to GBP0.54m compared to GBP1.4m of capital and interest debt servicing payments that was due for these three quarters prior to the amendment;
-- Subsequent debt servicing quarterly payments commencing October 2017 would comprise interest and capital resulting in quarterly payments due of GBP0.5m per quarter, giving a total interest and capital debt servicing payment of GBP2.0m per annum, a level consistent with the GBP2.0m due per annum prior to the amendment. Debt servicing payments remained due in January, April, July and October each year, with the overall repayment term unchanged and a final quarterly payment due in April 2022;
-- The escrow balance held by the Group in a 'restricted cash' bank account, equal to GBP1.3m at the date of the amendment (GBP1.3m at 31 December 2015), was transferred to the primary lender and applied against the outstanding capital balance, reducing the gross outstanding capital balance due under the finance lease. As set out in note 22, the escrow balance was reduced to nil as result of this transfer; and
-- The requirement to maintain an escrow balance based on financial performance and certain other obligations was suspended pending the outcome of discussions with the primary lender, which are ongoing at the date of these financial statements.
Further to the November 2016 debt amendment noted above, in the short term and by concession with rights reserved, the primary lender has (immediately prior to the date of this report) agreed not to enforce the quarterly debt capital and interest payment obligations for July 2017 through to and including April 2018 (totalling GBP1.7m). In addition, both parties have commenced discussions concerning the longer-term capital structure of the Group, which if successfully concluded would result in a more sustainable long-term capital structure for the Group in its restructure form.
The lease finance is secured on the fixed assets included in the sale and leaseback arrangement.
9.Notes supporting the cash flow statement
Cash and cash equivalents for the purposes of the cash flow statement comprise:
GROUP
--------------------
2016 2015
GBP'000 GBP'000
-------------------------------------- --------- ---------
Restricted cash and cash equivalents - 1,281
Cash and cash equivalents 2,360 2,345
2,360 3,626
-------------------------------------- --------- ---------
In November 2016, the Group agreed an amendment to its debt servicing obligations as set out in note 8 which included the utilisation of the restricted cash and cash equivalents balance in settlement of an element of the capital balance outstanding with the primary lender.
This information is provided by RNS
The company news service from the London Stock Exchange
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