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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Everyman Media Group Plc | LSE:EMAN | London | Ordinary Share | GB00BFH55S51 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 57.50 | 57.00 | 58.00 | 57.50 | 57.50 | 57.50 | 4,930 | 08:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Business Services, Nec | 78.82M | -3.5M | -0.0384 | -14.97 | 52.43M |
TIDMEMAN
RNS Number : 7685U
Everyman Media Group PLC
08 April 2021
8 April 2021
Everyman Media Group PLC
("Everyman" the "Company" or the "Group")
Audited results for the 52 weeks ended 31 December 2020
Everyman Media Group PLC (AIM: EMAN) announces its audited final results for the 52 weeks ended 31 December 2020. The year included 10 weeks of normal trading conditions, 25 weeks of full closure, and 17 weeks of disrupted trading due to COVID-19 restrictions.
Highlights
Underlying offering remains in demand
-- Robust admissions levels and exceptional year on year revenue growth experienced pre-March 2020 lockdown. -- Trading performance during the summer re-opening period was encouraging, despite limited new content, and demonstrated continued demand for the Everyman offer.
Business strength maintained
-- Strong balance sheet boosted by GBP16.9m fundraise in April 2020 and increased available banking facility to GBP40m. New covenants agreed covering the period from year end to June 2022. -- Bank borrowing at the year-end was GBP9m (2019: GBP14m). -- Successfully achieved rent concessions by continuing to work closely with landlords. -- Strong, sustained focus on cost management.
Positioned to perform strongly post-restrictions
-- Current estate of 35 sites and 117 screens as at 31 December 2020, with venues that are well designed for a post-COVID environment. -- Highly experienced CEO, Alex Scrimgeour, joined in January 2021 to lead the Company into its next stage of growth.
Performance review
-- Business performance has been severely impacted by the pandemic and the resulting restrictions on opening and trading throughout the year. -- Total revenue for the period was GBP24.2m (FY19: GBP65.0m), as a result of five months of closure. -- Adjusted loss from operations loss of GBP1.1m (FY19: GBP15.3m profit). -- Operating loss of GBP19.2m (FY19: GBP4.8m profit).
Outlook
There has been a roadmap set out by the government to reopening on May 17(th) when, if the vaccine roll out continues as planned, we plan to reopen all our venues. We are highly optimistic for the coming year post-lockdown and continue to be confident in people's appetite to safely socialise and be entertained; we believe we will be in a strong position once it is safe to welcome back our customers and teams.
The coming year's film slate is strong and varied, set to entertain people of all ages and demographics across the UK. We are also looking forward to unveiling an enhanced venue experience in the coming months. We have expanded our menu offering and have upgraded our kitchens in order to provide improved hospitality. We have made light refurbishments in a number of venues and upskilled staff by offering training during lockdown. Whilst uncertainty does of course remain around the future, we are eager to welcome back customers and look forward to providing them with an exceptional experience out, so deserved after nearly a year at home.
Alex Scrimgeour, Chief Executive Officer of Everyman said:
"Whilst it has been an unprecedented and extremely challenging year, it is clear to me that the team has done an excellent job in navigating those challenges. They minimised all costs during periods of closure, strengthened the Group's balance sheet, worked with our landlords to achieve rent concession and not least, remained actively engaged with our people and customers throughout.
During times in the year when our venues were able to open, the Group continued to enjoy the strong demand for the Everyman offering that it has seen for many years previously. Its innovative approach to providing new content was also welcomed, with the exclusive screening of Gorillaz concerts as well as old James Bond films both proving popular, for example. Exciting, exclusive programming will continue to be important to us as we look ahead.
Since joining in January, I have been struck by our strong foundation of supportive staff, customers, shareholders and of course our Board. Moving forward we remain confident that the nation's love of film remains and that our premium offering sets us apart. We will be in a strong position to bounce back, with a great opportunity to return to expansion once more when it is safe to welcome back our customers and our staff in just over a month's time."
For further information, please contact: Everyman Media Group PLC Alex Scrimgeour Tel : +44 (0)20 3145 0500 Elizabeth Lake Canaccord Genuity Limited (Nominated Adviser Tel : +44 (0)20 and Broker) 7523 8000 Bobbie Hilliam Georgina McCooke Alma PR (Financial PR Advisor) Tel: +44 (0)20 3405 0205 Susie Hudson Harriet Jackson Joe Pederzolli
About Everyman Media Group PLC:
Everyman is the fourth largest cinema business in the UK by number of venues and a premium leisure brand. Everyman operates a growing estate of venues across the UK, with an emphasis on providing first class cinema and hospitality.
Everyman is redefining cinema. It focuses on venue and experience as key competitive strengths, with a unique proposition:
-- Intimate and atmospheric venues, which become a destination in their own right -- An emphasis on a strong quality food and drink menu prepared in-house
-- A broad range of well-curated programming content, from mainstream and independent films to theatre and live concert streams, appealing to a diverse range of audiences
-- Motivated and welcoming teams
For more information visit http://investors.everymancinema.com
Chairman's statement
Navigating a challenging year
We started the financial year in a strong position, gaining on the momentum we had generated in 2019 and executing on our strategy to deliver profitable growth together with the expansion of our estate. This was demonstrated in revenue growth of 47% year-on-year across January and February, as well as the addition of 0.57 percentage points to our market share.
And then COVID-19 hit. On 17 March 2020 we were required to close all 33 of our venues as the UK entered a national lockdown, which lasted four months.
Following a phased re-opening in July, we opened two new sites: King's Road, Chelsea, on 24 July and Lincoln on 21 August, both of which performed strongly enough to suggest that they will make a significant contribution in due course. This took our estate to 35 venues with 117 screens.
By 21 August all venues were open and we enjoyed welcoming our community back to our venues. The release of Christopher Nolan's film 'Tenet' in August helped drive attendance and Everyman's performance far outstripped the market at this time as we delivered over twice our expected market share for the film at 8.95%. We were delighted by the continued demand and support shown by our customers.
From October more severe restrictions began to be re-introduced, until we reached a point on 30 December when all venues were again closed.
Each time we have been forced to close we have focused primarily on the safety of our people, both staff and customers, alongside careful cost management. Upon re-opening, we saw reassuring demand. The importance of entertainment has been re-enforced during lockdown and we are confident that when we are able to re-open the appetite for the Everyman experience will be undiminished.
KPIs
The Group uses the following key performance indicators, in addition to total revenues, to monitor the progress of the Group's activities:
Year ended Year ended 31 December 2 January 2020 2020 (52 weeks) (52 weeks) Admissions -63% 1,197,248 3,271,166 Box office average ticket price +5% GBP11.90 GBP11.37 Food and beverage spend per head +11% GBP7.89 GBP7.13
Admissions were 63% down year on year due to the impact of five months with most of the estate closed, and the impact of a reduced film slate. Once the business can re-open, we expect admissions to be above pre-pandemic levels over time.
The average ticket price grew by 5% with two factors at play, the positive being the benefit to the Group from the temporary reduction in VAT, then partially offset by a greater proportion of admissions being from venues outside London where ticket prices are lower.
Food and beverage spend per head has grown by 11%, this is mainly the result of takeaway sales from a number of our venues during periods of closure.
On-going COVID-19 response
Since March 2020 we have concentrated on reducing capital expenditure and operating costs to a minimum. This included Directors salary cuts, and the use of furlough. All but 18 of our staff were put on furlough by April and the Government supported 80% of wages up to a maximum of GBP2,500 per month for people who had been in place since the end of February. We have continued to use the Government furlough scheme throughout the year and currently have all but a handful of staff furloughed whilst our whole portfolio remains closed.
Further Government support was received in terms of rates relief, the VAT reduction and the Retail, Hospitality and Leisure Business Grant. We are grateful for the support received thus far and have used it in the spirit it was intended, to protect jobs and our business, and safeguard its future.
A significant part of our costs are property-related, and we are therefore pleased to have worked closely with our landlords throughout the year to successfully achieve variations to lease agreements. Concessions have been agreed on 85% of the estate, and further discussions are still ongoing. We would like to take this opportunity to again thank our landlords for their support and understanding.
We have also delayed a number of site refurbishments and new site openings. In some cases, and as previously communicated in our interim results, we have agreed to exit existing Agreements for Lease. These actions have significantly reduced the Group's future capital commitments with no obligations to open new venues in 2021, whereas previously 9 were due to open in 2021. We now have a pipeline for 2022/23 of 7 new venues.
With social distancing measures remaining until 21 June at the earliest, we will continue to operate at 30% less seating capacity and will remain focussed on managing costs to mitigate the impact of any shortfalls in revenue.
Our financial position
On 8 April we raised GBP16.9m net through an accelerated bookbuild in order to strengthen the Group's balance sheet, protect its venues against an extended closure period, to ensure prudent levels of debt and to allow the Group to re-engage with its expansion and investment programme in due course. The Placing was oversubscribed, and we again sincerely thank our shareholders for their support.
Our banking partners have also been supportive and have made appropriate changes to the covenants on the Group credit facility. The Group will remain within its banking covenants for the next 12 months, and has s ignificant remaining headroom, with Bank net debt of GBP8.7m (2019: GBP9.7m). Post-period end we announced an increase in our debt facilities from GBP30m to GBP40m, improving our liquidity position so we are able to take advantage of the many growth opportunities we see going forward.
Continued engagement with key stakeholders
At the heart of Everyman's proposition is our people and we have therefore consistently engaged with all our key stakeholders throughout the pandemic.
Our Everyman 'lockdown house parties' continued to be particularly successful, with households watching the same films simultaneously on a Saturday evening, and associated social media remaining strong. Our Instagram, Twitter and Facebook followers have increased year-on-year +29% to 87k; +1% to 34k and +7% to 126k, respectively.
We continued to engage with our loyal members through digital communications and the sending of small gifts and cards. Our members' ongoing support and enthusiasm for film has been greatly appreciated during lockdown.
Regular engagement with our team, focused on supporting their wellbeing, has taken place throughout the period.
Business Model
Everyman's business model remains simple, our aim is to further build our portfolio of venues. Additionally, growing our existing estate by bringing together great food, drink, atmosphere, service and of course film, to create exceptional experiences for our customers.
During 2020 the ability to execute this model was hampered by the impact of the pandemic on our business, however our ambitions remain the same.
Our growth strategy is multi-faceted:
- Expanding the geographical footprint by establishing new venues in order to reach new customers.
- Continually evolving the quality of experience and breadth of choice we offer at our venues. - Engaging in effective marketing activity.
Our model is one that delivers benefits, with the premium experience warranting a premium price point and with more revenue generating activities offered than the traditional cinema. As we grow, we also benefit from increasingly efficient central costs, allowing top line revenue growth to reflect in EBITDA growth.
Innovation
As a leader in cinema, innovation has and always will be essential, and it is something that we take great pride in. This year more than any other it has been critical to embrace innovation to produce a compelling slate of programming.
Examples of our innovation include teaming up with Blue Peter star Peter Duncan to co-produce a pantomime 'Jack and the Beanstalk', the first pantomime to be filmed for use in the cinema. The home-produced pantomime premiered at Everyman's King's Cross cinema on Saturday 5 December, before being rolled out across further Everyman venues in December. On Sunday 13 December Everyman live streamed Gorillaz: Song Machine Live, making our venues the only place where you could watch the concert with an audience.
In addition, when tier three restrictions were in place during December, Everyman was able to trade Deliveroo at the following sites: Crystal Palace, Hampstead, Barnet, Lincoln, Esher, Wokingham, Horsham and Altrincham, reinforcing the strength of the Group's food and drink offering.
Market developments
Whilst cinemas have been largely closed, film studios have begun to experiment with various new film delivery models, however we firmly believe there will always be a strong demand for cinema. Cinema offers a unique experiential component and at Everyman we provide
customers with not just the chance to enjoy a film, but a chance to enjoy it as part of a social event - an evening of entertainment with food, drink, and exceptional service.
Following a year that has disrupted many people's social lives, we believe there will be a strong level of demand for experience-led cinema. This view is reflected in PWC's recent report (1) : 'Where next for Travel and Leisure', where it is stated that during the lockdown, people will have missed experiences and there will be pent-up demand. Consumption of film has been strong during lockdown, and with it having been shown in previous years(2) that there is a positive relationship between cinema attendance and streaming behaviour, this bodes well for demand on reopening.
Outside of the UK there are encouraging signs that the pent-up demand for cinema is being satisfied in countries where cases of COVID-19 have fallen and lockdown has been eased. China, for example, reported record-breaking box office sales over February, with movie ticket sales totalling 11.2 billion yuan (US$1.7 billion). In the US, where cinemas have already re-opened, the release of Tom & Jerry has been popular, selling millions more tickets than expected. These trends indicate that consumers are eager for a social trip to the cinema, where they can enjoy an authentic movie experience following months of watching films in their own homes.
(1) https://www.strategyand.pwc.com/uk/en/reports/strategy-where-next-for-travel-and-leisure.pdf
(2) https://www.natoonline.org/wp-content/uploads/2019/01/2020-Theatrical-and-Streaming-Study.pdf
Expansion of our geographical footprint
We had planned to open six new venues in 2020 but following the impact of the pandemic we worked closely with landlords to push out the spend on new venues, helping preserve our cash position.
However, both Chelsea and Lincoln were completed during the period and opened in the summer. Both delivered encouraging performances whilst open.
The Group currently has venues in the following locations:
Number of Number of Location Screens Seats Altrincham 4 247 Birmingham 3 328 Bristol 3 439 Cardiff 5 253 Chelmsford 5 379 Clitheroe 4 255 Esher 4 336 Gerrards Cross 3 257 Glasgow 3 201 Harrogate 5 410 Horsham 3 239 Leeds 5 611 Lincoln* 4 291 Liverpool 4 288 London, 1 2 venues 3 5 2 ,942 Manchester 3 247 Newcastle 4 215 Oxted 3 212 Reigate 2 170 Stratford-Upon-Avon 4 384 Walton-On-Thames 2 158 Winchester 2 236 Wokingham 3 289 York 4 329 117 9,716 ----------------------- -----------------------
*New venues in 2020
People
Following the resignation of Crispin Lilly, who served as CEO for six years, in September the Group was delighted to confirm that Alex Scrimgeour would be joining as CEO. Alex assumed the role of CEO post period-end on 18 January 2021.
In Alex we have found an experienced leader whose understanding of the leisure sector resonates well with the Group. The Board is confident that Alex's commitment to strategy and innovation, as well as experience in leading a highly motivated workforce to success, will be vital in taking the Everyman brand forward in years to come.
We recognise that this has been an incredibly challenging period for our team, and we would like to thank them for their ongoing patience and understanding during such unprecedented times. When our sites did re-open during the year, our staff showed true professionalism and made sure that customers felt safe and comfortable. We look forward to welcoming our staff back as soon as we can.
Outlook
After spending the best part of a year at home, we believe that people's appetite to socialise and to be entertained will be stronger than ever. The financial performance of Everyman for the current year will however be influenced by a number of factors outside the control of the Group, including but not limited to lifting of restrictions on social gatherings and the timing of new film releases. Due to the prevailing environment, the Directors do not believe it appropriate to provide market guidance at this time, although they will do so as and when appropriate. However, we remain confident that, upon reopening the Everyman offer of film, food and fun in a safe environment will be as popular around the country as it was previously.
Paul Wise
Executive Chairman
7 April 2021
Strategic Report
The Directors present their strategic report for the Group for the year ended 31 December 2020 (comparative period: 52 weeks 2 January 2020). Comprising the Chief Executive's statement and the Chief Financial Officer's statement.
Review of the business
The Group made a loss after tax of GBP20,478,000 (2019: GBP1,729,000 profit - restated).
The Chief Financial Officers report contains a detailed financial review. Further details are also shown in the Chairman's statement and consolidated statement of profit and loss and other comprehensive income, together with the related notes to the financial statements.
Impact of COVID-19 on strategy
Since the pandemic, the growth strategy has been paused and the focus has been on securing the balance sheet and increasing liquidity, together with reducing costs. This has been achieved by working closely with our partners including suppliers, landlords and banks.
Chief Executive's Statement
Everyman is a quality brand with a passionate and dedicated team, and it is these traits of the business that I identify with and what originally drew me to joining the Company.
Since joining, I have been further struck by our strong foundation of supportive staff, customers and shareholders. Whilst I have only been with the business a couple of months, and under very unusual circumstances, it is evident that Everyman is a much-loved contemporary consumer brand and that the Group has significant scope for expansion. Even during lockdown, we have been assessing our offering and have identified several opportunities that will allow us to modernise the experience for our customers' needs, such as enhancing our technology and finance systems.
Looking ahead there are numerous reasons for confidence, beginning with the fact that Everyman is a much loved consumer brand with a unique offering, which we are confident will be in demand post-reopening. Beyond this, we have an encouraging film slate developing, we have identified opportunities to improve the Everyman experience, and the impact of COVID-19 on site availability has been to greatly increase the number of potential new venues across the UK, often at much more attractive financial arrangements. We have good liquidity, and supportive stakeholders across the business and therefore look forward to what can be achieved over the coming years.
Alex Scrimgeour
CEO
7 April 2021
Chief Financial Officer's Statement
Summary
-- The COVID- 19 pandemic has resulted in a material impact in the performance of the business during 2020. -- Group revenue decreased by 63% to GBP24.2m (2019: GBP65.0m) due to the closure of all venues for 5 full months of the year, and further localised closures, and restrictions on capacity and operations. -- Non-GAAP adjusted loss from operations was GBP1.1m (FY19: GBP15.6m profit) -- Operating loss of GBP19.3m (FY19: GBP4.7m profit) -- Significant shareholder support raising GBP16.9m at the start of the pandemic to strengthen the balance sheet. -- Net banking debt GBP8.7m (2019: GBP9.7m) with significant headroom in facilities
Revenue and Operating Profit
The business traded well until 16 March 2020, with revenue in January and February ahead of the same period in 2019 by 47% due to the level of admissions and the impact of five new venues opened in 2019. After March 16 all venues were shut, until a phased re-opening commenced from 4 July with all venues open by 21 August albeit with social distancing measures in place which reduced capacity by around 40%. Two new venues were opened at this time Kings Road Chelsea on 24 July and Lincoln on 21 July. From the middle of September new restrictions were introduced in areas with high rates of infection and in October the Government introduced a Tier system for levels of lockdown. The Tier system marked the start of venues being closed by the Government in certain areas and this spread to a national lockdown in November affecting all venues, Although the lockdown came to an end on 2 December, it was replaced with a strengthened 3 tier system, and by mid-December all venues in London and the South East were closed again. This situation then extended to nationwide by Christmas, and all venues have remained closed since then.
As a result, revenue in the period was down 63%
Reported gross margin was 62.2% (2019: 61.6%), with the increase due to a greater proportion of food and beverage revenue which carries a higher margin,
Other operating income of GBP6.2m is from Government support through the Job Retention Scheme (JRS) and the Business Support Grants (BSG). The Group received GBP5.7m in JRS income and has taken full advantage of the scheme with all but a skeleton staff working during periods of closure. For staff where 80% of their pay is above the GBP2,500 maximum supported by the scheme, the business has topped up their pay to 80%. Post the year end the business has continued to benefit from the JRS and will continue to do so where necessary until the end of the scheme in September 2021.
In addition to the JRS support from the Government the business also received GBP285k in BSG, and GBP78k in Local Restrictions Support Grant (Closed) (LRSGC). Since the year end the business continues to receive the LRSGC grants and will qualify for the Closed Business Lockdown Payment (CBLP) of up to GBP9k per venue.
Further Government assistance in the form of a rates holiday resulted in a saving of GBP1.1m.
Since March 2020 the focus has been on preserving the cash position of the business and reducing costs where possible. The business has worked closely with landlords to reach agreement on rent concessions. As at the date of signing these have been achieved in all but 5 venues, and the cash savings in 2020 equate to GBP1.4m. We have also received temporary reductions in service costs from a number of our suppliers. We would like to thank all our partners for the support they have given throughout the period.
Further savings were achieved through a 50% cut in Directors pay and a restructure of roles in head office and venues resulting in reduced headcount.
Within the operating loss there is a charge of GBP5.6m for impairment of goodwill, right-of-use assets and property, plant and equipment. The Board carried out a full impairment review at the year end, based on judgement of future cash flows by each venue. Due to the impact of COVID -19 on the net present value of future cash flows, four venues were identified as having a lower value in use value than the carrying value of the assets associated with the venue. Details of the review carried out and the allocation of the impairment against classes of assets is in note 17.
During the period the Board reviewed all future property commitments and where desirable, and possible has exited to protect future liquidity by reducing capital commitments. This has resulted in some charges for exiting (GBP625k) as well as the write off of costs already incurred on projects (GBP862k). The total of these charges is GBP1.5m.
The operating loss of GBP19.3m has therefore been materially impacted by the disruption from COVID-19, compared with a profit in 2019 of GBP4.7m
Non-GAAP adjusted loss from operations
Non-GAAP adjusted loss from operations was GBP1.1m, compared with a profit in 2019 of GBP15.6m. In addition to performance measures directly observable in the financial statements, additional performance measures (Non-GAAP adjusted loss from operations, Admissions, Average Ticket Price and Spend per Head) are used internally by management to assess performance. Management believes that these measures provide useful information to evaluate performance of the business as well as individual venues, to analyse trends in cash-based operating expenses, and to establish operational goals and allocate resources.
Non-GAAP adjusted loss from operations is defined as earnings before interest, taxes, depreciation, amortisation, impairment, share based payments and one-off lease costs and arising due to COVID-19.
The reconciliation between operating loss and non-GAAP adjusted loss from operations is shown at the end of the consolidated statement of profit and loss on page 38.
Cash Flows
The Group raised GBP16.9m (net) from shareholders in April to strengthen the balance sheet at the start of the pandemic, building in resilience for the closure of venues required by the UK Government response to the pandemic and the subsequent social distancing measures required when venues were able to open. At the same time the banking covenants were waived to remove the threat of breaching under the exceptional circumstances, and a new liquidity covenant introduced, which resulted in significant covenant headroom.
The Directors believe the Group balance sheet remains well capitalised, with sufficient working capital to service all of its day-to-day requirements. Net debt at the balance sheet date was GBP8.7m (2019: GBP9.7m). The funds raised from shareholders have been used to fund EBITDA losses during periods of closure and existing capital commitments.
Net cash used in operating activities was GBP5,394,000 (2019: GBP15,889,000 generated). Net cash outflows for the year, before financing, were GBP13,938,000 (2019: GBP8,217,000). This includes GBP8,074,000 on the acquisition of property plant and machinery (2019: GBP23,154,000), which was contracted spend relating to ongoing projects.
Cash held at the end of the year was GBP328,000 (2019: GBP4,271,000).
The Group had banking facilities totalling GBP30m in place at the year end, under a 5 year revolving credit facility (RCF) ending January 2024. At the year end the Group had drawn down GBP9.0 m (2019: GBP14.0 m) of the available funds, and therefore GBP21m of the facility was undrawn (2019: GBP16.0m).
Since the year end the facility has been amended to provide longer term liquidity if required, should the roadmap out of the pandemic extend further than anticipated. GBP5m of the GBP30m Revolving Credit Facility (RCF) has been transferred to a new Government backed Coronavirus Large Business Interruption Loan Scheme (" CLIBILS") RCF, in addition a further GBP10m CLIBILS RCF has been granted, bringing the total facility to GBP40m. Charges have been put in place over the net assets of the Group as collateral against the loan balance. New liquidity and EBITDA loss covenants have been agreed which will be reviewed again in May 2022. The liquidity covenant requires cash plus undrawn facility to exceed GBP7m, and there is a last twelve months rolling EBITDA covenant set at 30% above management estimates. The Board has reviewed forecast scenarios and believes the business can operate with sufficient headroom.
Pre-opening costs
Pre-opening costs, which have been expensed within administrative expenses, were GBP419,000 (2019: GBP1,044,000). Included within depreciation and financial expense is GBP0.1m also relating to pre-opening operating lease expenditure in the prior year. These costs include expenses which are necessarily incurred in the period prior to a new venue being opened but which are specific to the opening of that venue.
Restatement of accounting for leases
The financial statements include 3 prior year adjustments relating to accounting for leases under IFRS16. A detailed explanation and reconciliation of previously reported numbers is included in Note 2.
Annual general meeting
The annual general meeting of the Company will be held at 10:00am on 2 June 2021 at Everyman Cinema Hampstead, 5 Holly Bush Vale, London NW3 6TX.
Elizabeth Lake
CFO
7 April 2021
Consolidated statement of profit and loss and other comprehensive income for the year ended 31 December 2020
Restated* Year ended Year ended 31 December 2 January 2020 2020 Note GBP000 GBP000 Revenue 3 24,224 64,955 Cost of sales (9,147) (24,937) ------------------------- -------------------------- Gross profit 15,077 40,018 Covid -19 Government Support 6,062 - Impairment of goodwill, property, plant & machinery 5 (5,635) - Administrative expenses (34,764) (35,274) ------------------------- -------------------------- Operating (loss)/profit (19,260) 4,744 Financial income - 1 Financial expenses (2,911) (2,490) ------------------------- -------------------------- (Loss)/Profit before tax (22,171) 2,255 Tax credit/(expense) 1,693 (526) ------------------------- -------------------------- (Loss)/Profit for the year (20,478) 1,729 Other comprehensive income for the year (7) 1 ------------------------- -------------------------- Total comprehensive income for the year (20,485) 1,730 ------------------------- -------------------------- Basic (loss)/ earnings per share (pence) 4 (23.99) 2.39 ------------------------- -------------------------- Diluted (loss)/ earnings per share (pence) 4 (23.99) 2.36 ------------------------- -------------------------- All amounts relate to continuing activities. * See note 2 for details regarding the restatement. Non-GAAP measure: adjusted profit Restated* from operations Year ended Year ended 31 December 2 January 2020 2020 GBP000 GBP000 Adjusted (loss)/profit from operations (1,091) 15,588 Before: Depreciation and amortisation 6,7 (10,502) (8,824) Disposal of property, plant and equipment - (52) Acquisition expenses - (25) Pre-opening expenses (419) (1,044) Costs related to COVID- 19** (255) - Lease termination costs (625) - COVID-19 related rent concessions 813 - Abortive property costs COVID-19 (862) - Impairment of fixed assets (5,635) - Share-based payment expense (671) (688) Option-based social security (13) (211) ------------------------- -------------------------- Operating (loss)/profit (19,260) 4,744 ------------------------- --------------------------
**Includes legal and professional, HR and other one off expenses incurred as a result of the pandemic
Consolidated balance sheet at 31 December 2020
Restated* Restated* 31 December 2 January 2 January 2020 2020 2019 Note GBP000 GBP000 GBP000 Assets Non-current assets Property, plant and equipment 6 81,565 83,499 66,579 Right-of-use assets 7 55,446 58,023 - Intangible assets 5 9,140 10,694 10,655 Deferred tax asset 63 - - Trade and other receivables 173 173 173
--------------------- ------------------ -------------------- 146,387 152,389 77,407 --------------------- ------------------ -------------------- Current assets Inventories 381 507 406 Trade and other receivables 2,645 4,463 3,790 Cash and cash equivalents 328 4,271 3,517 --------------------- ------------------ -------------------- 3,354 9,241 7,713 --------------------- ------------------ -------------------- Total assets 149,741 161,630 85,120 --------------------- ------------------ -------------------- Liabilities Current liabilities Other interest-bearing loans and borrowings 43 122 56 Trade and other payables 9,476 14,408 12,398 Lease liabilities 7 2,641 2,421 - Corporation tax liabilities - 186 - --------------------- ------------------ -------------------- 12,160 17,137 12,454 --------------------- ------------------ -------------------- Non-current liabilities Other interest-bearing loans and borrowings 9,000 14,000 7,000 Other payables - - 7,796 Other provisions 1,035 1,027 2,531 Lease liabilities 7 75,367 72,900 - Deferred tax liabilities - 1,362 1,210 --------------------- ------------------ -------------------- 85,402 89,289 18,537 --------------------- ------------------ -------------------- Total liabilities 97,562 106,426 30,991 --------------------- ------------------ -------------------- Net assets 52,179 55,204 54,129 --------------------- ------------------ -------------------- Equity attributable to owners of the Company Share capital 9,110 7,352 7,099 Share premium 57,038 41,920 39,066 Merger reserve 11,152 11,152 11,152 Forex reserve (6) 1 - Retained earnings (25,115) (5,221) (3,188) --------------------- ------------------ -------------------- Total equity 52,179 55,204 54,129 --------------------- ------------------ --------------------
*See note 2 for details regarding the restatement.
These financial statements were approved by the Board of Directors on 7 April 2021 and signed on its behalf by:
Alex Scrimgeour
CEO
Consolidated statement of changes in equity for the year ended 31 December 2020
Share Share Merger Forex Retained Total capital premium reserve reserve earnings Equity Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Balance at 4 January 2019 7,099 39,066 11,152 - (2,880) 54,437 Prior year adjustments 2 - - - - (308) (308) --------- --------- --------- --------- ---------- ---------- Balance as at 4 January 2019 - restated for prior year adjustment* 7,099 39,066 11,152 - (3,188) 54,129 Effect of adoption of IFRS 16 (net of tax) - - - - (2,594) (2,594) Balance as at 4 January 2019 - restated for IFRS 16 7,099 39,066 11,152 - (5,782) 51,535 Profit for the year - restated - - - - 1,729 1,729 Retranslation of foreign currency denominated subsidiaries - - - 1 - 1 Total comprehensive income - - - 1 1,729 1,730 Shares issued in the period 253 2,854 - - - 3,107 Acquisition without change in control - - - - (1,510) (1,510) Share-based payments - - - - 688 688 Deferred tax on share-based payments - - - - (346) (346) --------- --------- --------- --------- ---------- ---------- Total transactions with owners of the parent 253 2,854 - - (1,168) 1,939 Balance at 2 January 2020 - restated* 7,352 41,920 11,152 1 (5,221) 55,204 Loss for the year - - - - (20,478) (20,478) Retranslation of foreign currency - - - (7) - (7) denominated subsidiaries --------- --------- --------- --------- ---------- ---------- Total comprehensive income - - - (7) (20,478) (20,485) Shares issued in the period 1,758 15,813 - - - 17,571 Share issue expenses - (695) - - - (695) Share-based payments - - - - 671 671 Deferred tax on share-based payments - - - - (87) (87) --------- --------- --------- --------- ---------- ---------- Total transactions with owners of the parent 1,758 15,118 - - 584 17,460 Balance at 31 December 2020 9,110 57,038 11,152 (6) (25,115) 52,179 --------- --------- --------- --------- ---------- ----------
*See note 2 for details regarding the restatement.
Consolidated cash flow statement for the year ended 31 December 2020
Restated* 31 December 2 January 2020 2020 Note GBP000 GBP000 Cash flows from operating activities (Loss)/ Profit for the year (20,478) 1,729 Adjustments for: Financial income - (1) Financial expenses 2,911 2,490 Income tax (credit)/expense (1,693) 526 --------------------------- ------------------ Operating (loss)/profit (19,260) 4,744 --------------------------- ------------------ Depreciation and amortisation 6,7 10,502 8,825 Impairment of goodwill, property, plant and equipment and right-of-use assets 5 5,635 - Loss on disposal of property, plant and
equipment 6 862 52 Acquisition and incorporation expenses (25) Transfer of property, plant and equipment to profit and loss - 5 Rent concessions (813) - Bad debts - (79) Acquisition and incorporation expenses - 25 Equity-settled share-based payments 671 688 --------------------------- ------------------ (2,403) 14,235 Changes in working capital: Decrease/ (Increase) in inventories 126 (101) Decrease/ (Increase) in trade and other receivables 1,818 (1,333) (Decrease)/Increase in trade and other payables (4,935) 3,088 --------------------------- ------------------ Net cash (used in)/generated from operating activities (5,394) 15,889 --------------------------- ------------------ Cash flows from investing activities Acquisition of property, plant and equipment 6 (8,074) (23,154) Proceeds from sale of property, plant and equipment - - Acquisition of intangible assets 5 (470) (953) Interest received - 1 --------------------------- ------------------ Net cash used in investing activities (8,544) (24,106) --------------------------- ------------------ Cash flows from financing activities Proceeds from the issuance of Ordinary shares 16,876 1,450 Proceeds from bank borrowings 10,000 13,000 Repayment of bank borrowings (15,000) (6,000) Lease payments - interest (2,493) (2,114) Lease payments - capital (473) (1,716) Landlord capital contributions 1,625 4,680 Capitalised finance expenses 17 68 Loan arrangement fees (136) (58) Interest paid (378) (339) --------------------------- ------------------ Net cash generated from financing activities 10,038 8,971 --------------------------- ------------------ Exchange loss on cash and cash equivalents (43) - Net increase/(decrease) in cash and cash equivalents (3,943) 754 --------------------------- ------------------ Cash and cash equivalents at the beginning of the year 4,271 3,517 --------------------------- ------------------ Cash and cash equivalents at the end of the year 328 4,271 --------------------------- ------------------
The Group had GBP21,000,000 of undrawn funds available (2019: GBP16,000,000) of the loan facility at the year end.
1 General information
Everyman Media Group PLC and its subsidiaries (together, the Group) are engaged in the ownership and management of cinemas in the United Kingdom. Everyman Media Group PLC (the Company) is a public company limited by shares registered, domiciled and incorporated in England and Wales, in the United Kingdom (registered number 08684079). The address of its registered office is Studio 4, 2 Downshire Hill, London NW3 1NR. All trade takes place in the United Kingdom.
2 Basis of preparation and accounting policies
This final results announcement for the year ended 31 December 2020 has been prepared in accordance with the recognition and measurement criteria of International Accounting Standards in conformity with the requirements of the Companies Act 2006. The accounting policies applied are consistent with those set out in the Everyman Media Group plc Annual Report and Accounts for the year ended 31 December 2020.
The financial information contained within this final results announcement for the year ended 31 December 2020 and the year ended 3 January 2020 is derived from but does not comprise statutory financial statements within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 3 January 2020 have been filed with the Registrar of Companies and those for the year ended 31 December 2020 will be filed following the Company's annual general meeting. The auditors' report on the statutory accounts for the year ended 31 December 2020 is unqualified, does not draw attention to any matters by way of emphasis, and does not contain any statement under section 498 of the Companies Act 2006.
Going concern
In early 2020, the outbreak of COVID-19 was declared a global pandemic by the World Health Organisation. In response, Everyman introduced enhanced cleaning protocols and reduced capacity in theatres to promote social distancing and comply with Government guidelines. On 17 March 2020, the Group closed all venues as the UK entered a national lockdown, lasting four months. Following a phased re-opening all venues were trading by 21 August before more severe restrictions began to be re-introduced in October. By the year- end all venues were closed and this remains the case at the date of approval of these financial statements. The Group experienced reassuring demand each time venues re-opened providing confidence demand will return when restrictions are lifted.
To mitigate the negative impact of COVID-19 a variety of measures were introduced including cost reduction and the postponement of new sites, refurbishments and other capital expenditure projects. As significant part of the Group's costs are property-related and variations to lease agreements have been agreed with 85% of the estate to reduce cash costs to the business.
The continuing uncertainty due to the COVID-19 pandemic has been considered as part of the Group's adoption of the going concern basis. In particular, the ability to reopen, availability of film content and recovery profile of admissions.
Liquidity
On 8 April 2020 the Group raised GBP16.9m net through an accelerated book build in order to strengthen the balance sheet, protect venues against an extended closure period, ensure prudent levels of debt and to allow the Group to re-engage with its expansion and investment programme in due course.
For the full year, the Group had a Revolving Credit Facility ("RCF") in place for GBP30m, this was agreed on 16 January 2019 and is repayable in full on or before 15 January 2024. As at 31 December 2020, the Group had drawn down GBP9m of this facility and closed the year with GBP0.4m of cash, therefore the net debt position was GBP8.6m, with the undrawn facility at GBP21.4m. The banking covenants for the facility had been waived for the period April 2020 to March 2021, and a single liquidity covenant introduced for the period. This resulted in significant headroom in the Group's banking facilities.
Since the year end the facility has been amended to provide more liquidity if required, should the roadmap out of the pandemic extend further than anticipated GBP5m of the GBP30m Revolving Credit Facility (RCF) has been transferred to a new Government backed Coronavirus Large Business Interruption Loan Scheme ("CLIBILS") RCF, in addition a further GBP10m CLIBILS RCF has been granted, bringing the total facility to GBP40m. Charges have been put in place over the net assets of the Group as collateral against the loan balance. New liquidity and EBITDA loss covenants have been agreed which will be reviewed again in May 2022. The liquidity covenant requires cash plus undrawn facility to exceed GBP7m, and there is a last twelve months rolling EBITDA covenant set at 30% above management estimates, reflecting the uncertainty that still remains. At the date of this report the undrawn facility is GBP26m The Board has reviewed forecast scenarios and believes the business can operate with sufficient headroom.
Base case Scenario
The Board's latest forecasts are based on a scenario where the business remains closed until 17 May 2021 in line with the current Government roadmap. The forecast assumes reduced admissions, around 25% of pre-pandemic admits, from re-opening until October 2021 as there is uncertainty around the film slate at this period. From October the Board have assumed that the last 3 months of the year will deliver 75% of 2019 admissions, as a number of high-profile new films are scheduled for release. The Board have assumed that 2022 admits return to 2019 levels as social distancing measures are removed, this excludes the impact of increased capacity available from the two new venues opened in the year.
All of the continued Government support is included in the forecasts, this includes JRS continuing until the end of September 2021, 5% VAT until the end of September 2021 followed by 12.5% VAT until the end of March 2022. The Business Restart Grant is assumed to be received in May 2021 and the extension of the rates holiday until the end of June 2021 followed by a one third reduction until the end of March 2022.
In this scenario the Group maintains significant headroom in its banking facilities.
Stress testing
Given the continued uncertainty around the impact of COVID-19 over the next 12 months and difficulties forecasting the impact on consumer behaviour and admission profile the Board has also considered the scenario of complete closure continuing until there is a breach in the banking covenants. This scenario assumes that the Government would extend JRS, the rates holiday and 5% VAT until the month of re-opening. In this scenario the business would need to remain shut until the end of December 2021 to cause a breach in the last twelve months rolling EBITDA covenant. The business would still have significant liquidity covenant headroom in this scenario.
The Board has also considered a severe but plausible downside scenario whereby, after reopening in May 2021 as planned, all venues are required to close for two months during Autumn 2021 as part of a circuit break imposed to contain a resurgence of the virus or its variants. Under this scenario the Group forecast continued compliance with banking covenants and sufficient liquidity.
The forecasts are under continuous review given current market conditions associated with COVID-19. The business has the ability to remain trading for a period of at least 12 months from the date of signing of these financial statements.
The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these consolidated financial statements. The Board considers that closure until December 2021 is unlikely and that the Group has sufficient headroom to navigate the severe but plausible downside scenario described above. Therefore does not believe this to represent a material uncertainty. Therefore the Board consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
Use of non-GAAP profit and loss measures
The Group believes that along with operating profit, the 'adjusted profit from operations' provides additional guidance to the statutory measures of the performance of the business during the financial year. The reconciliation between operating profit and non-GAAP loss from operations is shown on page 38.
Adjusted profit or loss from operations is calculated by adding back depreciation, amortisation, pre-opening expenses and certain non-recurring or non-cash items. Adjusted profit is an internal measure used by management as they believe it better reflects the underlying performance of the Group beyond generally accepted accounting principles.
Restatement of accounting for leases
Restatement of prior As previously Restatement Restatement Restated year reported numbers reported 1 2 2 January 2 January 2020 2 January 2020 2020 GBP'000 GBP'000 GBP'000 GBP'000 -------------- ------------ ------------ ----------- Group Income Statement Profit for the period 1,770 46 (87) 1,729 -------------- ------------ ------------ ----------- Group Statement of Changes in Equity Profit for the period 1,770 46 (87) 1,729 -------------- ------------ ------------ ----------- Balance Sheet Right-of-use assets 58,415 (1,023) 631 58,023 Current Lease liabilities (2,386) (35) - (2,421) Other provisions - - (1,027) (1,027) Lease liabilities (74,005) 1,105 - (72,900) Retained earnings (4,872) 46 (395) (5,221) -------------- ------------ ------------ ----------- Net Assets and Total Equity 55,553 46 (395) 55,204 -------------- ------------ ------------ ----------- Restatement of prior As previously Restatement Restatement Restated year reported numbers reported 1 2 3 January 3 January 2019 3 January 2019 2019 GBP'000 GBP'000 GBP'000 GBP'000 -------------- ------------ ------------ ----------- Group Statement of Changes in Equity Total equity balance 54,437 - (308) 54,129 -------------- ------------ ------------ ----------- Balance Sheet Property, plant and equipment 66,150 - 429 66,579 Other provisions (1,794) - (737) (2,531) Retained earnings (2,880) - (308) (3,188) -------------- ------------ ------------ ----------- Net Assets and Total Equity 54,437 - (308) 54,129 -------------- ------------ ------------ -----------
Restatement 1
For the Kings Cross venue, a length of lease of 25 years had been used to calculate the transition to IFRS16 on 2 January 2019. The length of the lease is 15 years and therefore the right of use asset, lease liability, depreciation and finance charge have been recalculated to correct the figures from 1 January 2019 when IFRS16 was adopted.
The result was a reduction in the right of use asset of GBP1,023,000 and a corresponding reduction in the lease liability of GBP1,140,000. This also gave rise to an increase in the depreciation charge within Administrative expenses of GBP36,000 and a reduction in the finance charge of GBP82,000. Therefore, the net impact was an increase in profit of GBP46,000.
Restatement 2
Under the terms of the Group's leases an estimated dilapidations provision should have been accounted for to recognise the potential future liability at the point of signing the leases. Correcting for this omission has given rise to a prior year adjustment.
There are two elements to the provision. For leases where there is a strip out clause, the cost of stripping out at the end of the lease has been estimated and discounted using the appropriate risk free rate of 1.03% (2019:1.133%, 2018: 1.717%). This has given rise to an adjustment in the balance sheet as at 2 January 2019 of GBP429,000 to create the provision with the corresponding debit going to Property, Plant and Equipment. In addition, the Group has a number of full repairing leases and a provision of GBP308,000 has been made for those venues in the balance sheet as at 3 January 2019, with the debit going to retained earnings. The overall restatement in the balance sheet as at 2 January 2019 is a total provision of GBP737,000.
After this date IFRS 16 has been adopted and the provision is recognised differently, with the strip out provision being recognised in the ROU asset. With the addition of 7 venues to the estate in 2019, a further increase in the provision was needed, and can be seen in the table above.
Restatement 3
Since the implementation of IFRS 16, lease payments and landlord capital contributions have been shown separately within the consolidated cash flow statement as part of financing activities. In the comparative cash flow statement the cash flows were presented as a net inflow of GBP850,000. In accordance with IFRS the cash flows should have been presented gross and are now reported as an outflow of GBP3,830,000 in respect of lease payments and inflow of GBP4,680,000 in respect of landlord capital contributions.
3 Revenue Year ended Year ended 31 December 2 January 2020 2020 GBP000 GBP000 Film and entertainment 13,565 37,195 Food and beverages 9,447 23,310 Venue Hire, Advertising and Membership Income 1,212 4,450 ------------------- --------------- 24,224 64,955 ------------------- ---------------
All trade takes place in the United Kingdom.
The following provides information about opening and closing receivables, contract assets and liabilities from contracts with customers.
Contract balances 31 December 2 January 2020 2020 GBP000 GBP000 Trade and other receivables 226 1,428 Deferred income 3,028 3,813 ------------------- ----------------------
Deferred income relates to advanced consideration received from customers in respect of memberships, gift cards and advanced screenings. All deferred balances at the beginning of the year (GBP3,813,000) were recognised in the profit and loss during the year. All deferred income at the end of the year (GBP3,028,000) is due to be recognised within 12 months.
4 Earnings per share Restated* Year ended Year ended 31 December 2 January 2020 2020 GBP000 GBP000 (Loss)/profit used in calculating basic and diluted earnings per share (20,478) 1,729 ----------------------- -------------------- Number of shares (000's) Weighted average number of shares for the purpose of basic earnings per share 85,372 72,245 ----------------------- -------------------- Number of shares (000's) Weighted average number of shares for the purpose of diluted earnings per share 85,372 73,179 ----------------------- -------------------- Basic (loss)/ earnings per share (pence) (23.99) 2.39 ----------------------- -------------------- Diluted (loss)/ earnings per share (pence) (23.99) 2.36 ----------------------- -------------------- Weighted average number of shares for the purpose of basic earnings per share 31 December 2 January 2020 2020 Weighted Weighted average average no. 000's no. 000's Issued at beginning of the year 73,518 70,989 Share options exercised 76 623 Shares issued 11,778 - Shares issued as consideration for acquisition with no change of control - 633 ------------------ ---------------------- Weighted average number of shares at end of the year 85,372 72,245 ------------------ ---------------------- Weighted average number of shares for the purpose of diluted earnings per share Basic weighted average number of shares 85,372 72,245 Effect of share options in issue - 934 ------------------ ------------------ Weighted average number of shares at end of the year 85,372 73,179 ------------------ ------------------
Basic earnings per share values are calculated by dividing net profit/(loss) for the year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the year. The shares issued in the year in the above table reflect the weighted number of shares rather than the actual number of shares issued.
The Company has 6.6m potentially issuable Ordinary shares (2019: 4,278,000) all of which relate to the potential dilution from share options issued to the Directors and certain employees and contractors, under the Group's incentive arrangements. In the current year these options are anti-dilutive as they would reduce the loss per share and so haven't been included in the diluted earnings per share.
The Company made a post-tax profit for the year of GBP1.8m (2019: GBP1,470,000).
*See note 2 for details regarding the restatement.
5 Goodwill, intangible assets and impairment Goodwill Leasehold Software Total GBP'000 GBP'000 interests Assets GBP'000 GBP'000 Cost At 3 January 2019 8,951 674 1,632 11,257 Acquired in the year - - 953 953 Disposals - (674) (63) (737) At 2 January 2020 8,951 - 2,522 11,473 Acquired in the year - - 470 470 Disposals - - - - At 31 December 2020 8,951 - 2,992 11,943 --------- ----------- --------- -------------- Amortisation and impairment At 3 January 2019 - 126 476 602 Charge for the year - - 366 366 On disposals - (126) (63) (189) --------- ----------- --------- -------------- At 2 January 2020 - - 779 779 Charge for the year - - 420 420 Impairment 1,599 - 5 1,604 At 31 December 2020 1,599 - 1,204 2,803 --------- ----------- --------- -------------- Net book value At 31 December 2020 7,352 - 1,788 9,140 --------- ----------- --------- -------------- At 2 January 2020 8,951 - 1,743 10,694 --------- ----------- --------- -------------- At 3 January 2019 8,951 548 1,156 10,655 --------- ----------- --------- --------------
All intangibles in the company were disposed of in the period ended 2 January 2020 and balance is therefore also GBPnil at 31 December 2020.
Impairment Review
An impairment of GBP5,635,000 has been made in the period, caused by the impact of COVID-19 on future cash flows due to periods of closure, social distancing measures and the lack of new film content. Whilst these impacts are short-term they result in 4 venues where the value-in-use was lower that the carrying value of the assets.
Value-in-use calculations are performed annually and at each reporting date for each cash-generating unit (CGU) which represents each site acquired. Value-in-use was calculated as the net present value of the projected risk-adjusted post-tax cash flows plus a terminal value of the CGU. A pre-tax discount rate was applied to calculate the net present value of pre-tax cash flows. The discount rate was calculated using a market participant weighted average cost of capital. Whilst there is some sensitivity to the inputs, the methodology is not significantly impacted by reasonable fluctuations in inputs. Goodwill and indefinite life intangible assets considered significant in comparison to the Group's total carrying amount of such assets have been allocated to CGUs or groups of CGUs as follows:
31 December 2 January 2020 2020 GBP000 GBP000 Baker Street 103 103 Barnet 1,309 1,309 Belsize Park - 67 Esher 2,804 2,804 Gerrards Cross 1,309 1,309 Islington 86 86 Muswell Hill 1,215 1,215 Oxted 102 102 Reigate 113 113 Walton-On-Thames 94 94 Winchester 217 217 York - 1,532 7,352 8,951 --------------------- ---------------------
The recoverable amount of each CGU has been calculated with reference to its value-in-use. The key assumptions of this calculation are shown below:
31 December 2 January 2020 2020 Discount rate 9.8% 8.83% Long term growth rate 2% 2% Number of years projected 5 years 5 years
Most revenue streams have experienced significant reductions since the pandemic's effects became widespread. The Company considered the reduced sales and reductions in budgeted revenue as indicators of impairment, and therefore determined the recoverable amount for all of its cash generating units. The recoverable amount is the higher of fair value less costs of disposal and value in use.
The cash flow forecasts were probability weighted based on the following scenarios:
1. Base Case (70% weighting): Venues remain closed until the end of May, with admission and CGU cash generation levels not returning to close to pre-pandemic levels until October 2021 due to timing of film releases and continuing social distancing measure in venues. 2022 cash generation levels per CGU are assumed at the same level of 2019 (pre-pandemic) plus 2% growth, and then 2023 grows at 6%, and 2024-2025 grow 5%.
2. Positive case (10% weighting): The assumptions in this case are the same as the base case except that cash generation levels per CGU increase by 8% between 2023-2025.
3. Downside case (20% weighting): Further closures assumed with cash generated per CGU reducing by 25% from the base case in 2021. For 2022 each CGU's cash generation has been assumed at 90% of 2019, plus 2% allowance for growth. All other assumptions thereafter remain the same as the base case.
The terminal value includes a growth rate of 2%, which is set to be consistent with the UK historic growth rate.
The cash flows were discounted at a rate of 9.8%, which represents the time value of money and risks specific to the Group's industry, which were not reflected in the value in use cash flows.
The results of this review showed 4 cash generating units where the carrying value of the assets exceeded their recoverable amount.
Venue (CGU) Carrying amount Recoverable amount Impairment loss GBP'000 GBP'000 GBP'000 ---------------- ------------------- ---------------- Belsize Park 1,937 1,498 439 ---------------- ------------------- ---------------- Leeds 6,563 4,347 2,216 ---------------- ------------------- ---------------- Liverpool 3,849 2,894 955 ---------------- ------------------- ---------------- York 6,807 4,782 2,025 ---------------- ------------------- ---------------- Total 19,156 13,521 5,635 ---------------- ------------------- ----------------
The impairment of the Group's assets is summarised as follows:
Carrying Carrying value before Recoverable Impairment value after Class of Asset impairment amount GBP'000 impairment GBP'000 GBP'000 GBP'000 Goodwill 8,951 1,599 7,352 -------------- -------------- ------------- ------------- Right-of-use assets 57,281 1,857 55,424 -------------- -------------- ------------- ------------- Corporate Assets 3,450 99 3,351 -------------- -------------- ------------- ------------- Leasehold improvements, PPE, F&F 81,980 2,080 79,900 -------------- -------------- ------------- ------------- Total 151,662 255,788 5,635 146,027 -------------- -------------- ------------- -------------
The amount by which the impairment changes is sensitive to the discount rate used and the assumptions on future trading levels, the potential impact is demonstrated in the scenarios below (independent of each other;
-- Increasing the discount rate by 1%in the base case results in (I) 5 further venues being impaired, and (II) an increase in the impairment charge of GBP4,169,000; or
-- Adjustment in the assumptions used in in the base case (i.e. the most likely case) cash flow scenario, decreasing the 2022 expected cashflows to 70% of 2019 levels for each venue results in:
(I) 1 further venue being impaired, and (II) An increase in the impairment charge of GBP588,000 6 Property, plant and equipment
(Group)
Plant Fixtures Land & Leasehold & & Assets under Buildings improvements machinery Fittings construction Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Cost At 3 January 2019 * restated 6,339 52,637 10,603 7,803 3,403 80,785 Acquired in the year 190 15,329 4,130 1,694 1,811 23,154 Disposals - (150) (261) (592) - (1,003) Transfer to profit and loss - - - - (5) (5) Transfer to ROU assets - (429) - - - (429) Transfer on completion - 2,138 174 457 (2,769) - ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ At 2 January 2020 6,529 69,525 14,646 9,362 2,440 102,502 Acquired in the year - 1,809 1,471 417 4,377 8,074 Disposals - - (380) - (482) (862) Transfer on completion - 4,289 261 161 (4,711) - At 31 December 2020 6,529 75,623 15,998 9,940 1,624 109,714 ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ Depreciation At 3 January 2019 * restated - 6,760 4,383 3,063 - 14,206 Charge for the year 109 2,615 2,197 827 - 5,748 On disposals - (99) (260) (592) - (951) ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ At 2 January 2020 109 9,276 6,320 3,298 - 19,003 Charge for the year 111 3,233 2,633 995 - 6,972 Impairment - 1,845 220 109 - 2,174 At 31 December 2020 220 14,354 9,173 4,402 - 28,149 ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ Net book value At 31 December 2020 6,309 61,269 6,825 5,538 1,624 81,565 ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ At 2 January 2020 6,420 60,249 8,326 6,064 2,440 83,499 ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------ At 2 January 2019
* restated 6,339 45,877 6,220 4,740 3,403 66,579 ----------------------- --------------------- ------------------- ------------------ ----------------------- ------------------
For impairment considerations of tangible fixed assets this was considered using the value in use basis disclosed in Note 9.
*See note 2 for details regarding the restatement.
7 Leases
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used.
On initial recognition, the carrying value of the lease liability also includes:
-- amounts expected to be payable under any residual value guarantee;
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
-- lease payments made at or before commencement of the lease; -- initial direct costs incurred; and
-- the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations ).
--
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
If the group revises its estimate of the term of any lease it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
Nature of leasing activities
The group leases a number of properties in the towns and cities from which it operates. In some locations, depending on the lease contract signed, the lease payments may increase each year by inflation or and in others they are reset periodically to market rental rates. For some property leases the periodic rent is fixed over the lease term.
The group also leases certain vehicles. Leases of vehicles comprise only fixed payments over the lease terms.
The percentages in the table below reflect the current proportions of lease payments that are either fixed or variable. The sensitivity reflects the impact on the carrying amount of lease liabilities and right-of-use assets if there was an uplift of 5% on the balance sheet date to lease payments that are variable.
31 December 2020 Lease Fixed Variable Sensitivity contract payments payments GBP'000 numbers % % Property leases with payments linked to inflation 17 - 46% +2,333 Property leases with periodic uplifts to market rentals 16 - 49% +1,313 Property leases with fixed payments 2 4% - - Vehicle leases 3 1% - - ---------- ---------- ---------- ------------ 38 5% 95% +3,646 ---------- ---------- ---------- ------------
The percentages in the table below reflect the proportions of lease payments that are either fixed or variable for the comparative period.
02 January 2020 Lease Fixed Variable Sensitivity contract payments payments GBP'000 numbers % % Property leases with payments linked to inflation 16 - 43% +2,151 Property leases with periodic uplifts to market rentals 16 - 49% +1,425 Property leases with fixed payments 2 7% - - Vehicle leases 3 1% - - ---------- ---------- ---------- ------------ 37 8% 92% +3,576 ---------- ---------- ---------- ------------
Right-of-Use Assets
(Group)
Land & Buildings Motor Vehicles GBP'000 GBP'000 Total GBP'000 On adoption of IFRS 16 * restated 48,804 - 48,804 Additions 11,880 50 11,930 Amortisation * restated (2,700) (11) (2,711) ----------------- --------------- ---------- At 2 January 2020* restated 57,984 39 58,023 ----------------- --------------- ---------- Land & Buildings Motor Vehicles GBP'000 GBP'000 Total GBP'000 At 2 January 2020* restated 57,984 39 58,023 Additions 712 - 712 Amortisation (3,093) (17) (3,110) Impairment (1,857) - (1,857) Effect of modification to lease terms 1,678 - 1,678 At 31 December 2020 55,424 22 55,446 ----------------- --------------- ----------------
*See note 2 for details regarding the restatement.
Lease Liabilities
(Group)
Land Motor & Buildings Vehicles Total GBP'000 GBP'000 GBP'000 Recognition on adoption of IFRS16 * restated 60,431 - 60,431 Additions 16,556 50 16,606 Interest expense 2,113 1 2,114 Lease payments (3,810) (20) (3,830) ------------- ---------- ---------------- At 2 January 2020 * restated 75,290 31 75,321 ------------- ---------- ---------------- Land Motor & Buildings Vehicles Total GBP'000 GBP'000 GBP'000 At 2 January 2020 * restated 75,290 31 75,321 Additions 2,297 - 2,297 Interest expense 2,492 1 2,493 Effect of modification to lease terms 1,678 - 1,678 Rent concession gains (see note below) (813) - (813) Lease payments (2,954) (14) (2,968) ------------- ---------- ---------------- At 31 December 2020 77,990 18 78,008 ------------- ---------- ---------------- Restated 31 December 2 January 2020 2020 GBP'000 GBP'000 Lease liabilities Current 2,641 2,421 Non-current 75,367 72,900 ------------ ----------- 78,008 75,321 ------------ -----------
* See note 2 for details regarding the restatement .
Rent Concessions
Due to Government policy, the Group had to suspend trading across all venues during 2020 for differing time periods.
The Group has received numerous forms of rent concessions from lessors due to the Group being unable to operate for significant periods of time, including:
- Rent forgiveness (e.g. reductions in rent contractually due under the terms of lease agreements); and
- Deferrals of rent (e.g. payment of April - June rent on an amortised basis from January to March 2021).
As discussed in note 2 the Group has elected to apply the practical expedient introduced by the amendments to IFRS 16 to all rent concessions that satisfy the criteria. Substantially all of the rent concessions entered into during the year satisfy the criteria to apply the practical expedient. For any of the modifications that did not meet the practical expedient requirements; the lease liability was remeasured using the discount rate applicable at the date of modification, with the right of use being adjusted by the same amount.
The application of the practical expedient has resulted in the reduction of total lease liabilities of GBP813,355. The effect of this reduction has been recorded as a gain in the period in which the event or condition that triggered those payments occurred.
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April 08, 2021 02:00 ET (06:00 GMT)
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