Regulatory Story
Go to market news section View chart   Print
RNS
Snoozebox Holdings PLC  -  ZZZ   

Preliminary Results

Released 07:00 29-Jun-2016

RNS Number : 5598C
Snoozebox Holdings PLC
29 June 2016
 

Snoozebox Holdings plc

Preliminary announcement of results for the year ended 31 December 2015

Snoozebox Holdings plc (AIM: ZZZ), ("the Company" or "the Group") today announces its preliminary results for the year ended 31 December 2015.

2015 Highlights

·     Revenue increased to £5.82m (2014: £2.76m)

·     Adjusted EBITDA* loss £5.96m (2014: £3.58m)

·     Exceptional tangible fixed assets impairment charge of £9.6m (2014: no impairment)

·     Loss from operating activities £17.90m (2014: £5.41m)

·     Loss before taxation increased to £18.88m (2014: £5.64m)

·     Loss per share increased to 8.91p (2014: loss 3.09p)

*Adjusted EBITDA is EBITDA before exceptional items and share-based payment charges

2015 has been a very tough year for the Group and I am mindful that it has been an equally if not tougher one for shareholders, who have seen the value of their investment significantly diminished. 

Following a comprehensive strategic business review, we have commenced the execution of a strategy formed to deliver clear objectives that are aligned to the interests of shareholders and stakeholders more widely.

The Board believes that the Group has access to sufficient accommodation assets and market opportunity to achieve our short to medium term objectives.  Clearly we must now successfully execute the Group's strategic plans and, critically, secure customers to get these accommodation assets deployed earning target revenues and margins in as short a time as possible.

Chris Errington, Executive Chairman, commented:

"Whilst we have challenges ahead of us, we are now approaching these with a clear sense of purpose.  Our task is to improve the Group's fortunes for the longer term, recognising that our main challenge will be securing new customers in the short to medium term.  The appointment of a small team of experienced executives is designed to address these challenges head on and improve our chances of success. Concurrently, we will continue to work with our primary lender seeking an amendment to the debt repayment terms to place the Group on an improved financial footing."

 

The Company's audited Annual Financial Statement for the year ended 31 December 2015 will be available on the Company's website shortly and will be posted to shareholders before the end of June along with notice of the Company's Annual General Meeting.

 

Enquiries:

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 2015.  The Strategic Report comprises the:

·     Chairman's Statement; and

Chairman's Statement

This is my first report to you as Chairman, having been appointed as a Non-Executive director on 8 January 2016, moving to Non-Executive Chairman on 26 February 2016 and becoming Executive Chairman on 25 April 2016.

Over the past few years, Snoozebox has established itself as a leading provider of rapidly deployed quality accommodation.

The Group has historically delivered poor financial results and the year ended 31 December 2015 was no different, a review of the results for 2015 is set out in the Operating and Financial Review.

In April 2016, the Board began taking firm and decisive action to reverse this trend including a comprehensive strategic review of the business and cost reduction exercise.   The following sections of this Report set out in more detail the results of this review and identify the Group's business objectives and key business strategies that we are adopting going into the second half of 2016.

The Board has recently appointed a small team of industry experienced executives to drive the execution of strategy and manage the day-to day-operations and finances of the Group, reporting to the Board.

Strategic Review of the Business

The Board began a comprehensive review of the business in Q1 2016 with a view to putting the Group on a more sustainable financial footing and improving future trading.   That review is now complete.

The key findings of the review were:

·     Accommodation Assets.  The Group has a good stock of differentiated and viable accommodation assets and access to a reasonable market for those assets from which it should be able to generate sufficient revenues to at least cover overheads and service debt in the medium-to-long term;

·     Unique Selling Points.  The Group's key differentiator is the ability to rapidly deploy quality accommodation solutions on a semi-permanent basis;

·     Semi-Permanent Market.  The Semi-Permanent market is most likely to generate the revenue and margins required to achieve the Group's short-to-medium term business objectives, whilst also delivering 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 overhead required to support such operations should be relatively low, when compared to the existing Events market.  Whilst the Hybrid Semi-Permanent model (as described later in this Report) introduces efficiency and longevity to what would otherwise be an Events deployment, the model does not appear to be viable going forward based on the poor financial returns available;

·     Events Market.  The Events market may generate a modest contribution towards short and medium term objectives, but because of the longer void periods associated with moving assets from event to event, and the related high one-off deployment and extraction costs, this market is unlikely to contribute significantly to short or medium term trading at the Group's current scale.  The overhead required to support such operations is also relatively high, when compared to the Semi-Permanent market;

·     Sales Focus.  A careful balance of Semi-Permanent and Events deployments needs to be achieved going forward, with a keen focus on ensuring that the Group's key objectives are met in the short-to-medium term; and

·     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.  Significant funds have been invested in the production of new room types and expanding geographic and vertical markets, whilst existing stocks of accommodation assets were under-utilised and future revenues streams from those assets remained uncertain.

The Board has considered each of these findings and sets out below the key Business Objectives and Business Strategy the Group has adopted for the remainder of 2016 and beyond.

Business Objectives

The Group is now 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. 

The Group has access to a range of accommodation assets which in the opinion of the Board are sufficient to deliver objectives (1) and (2).  As outlined in the Business Strategy section below, the Board has adopted and commenced the execution of strategies designed to maximise the Group's ability to identify, qualify then win new customers in markets that will lease Semi-Permanent accommodation on commercial terms consistent with achievement of our objectives.  This includes efforts to convert existing pipeline customers as well as the identification of new opportunities for placing existing accommodation assets in the market.

In the medium-to-long term, the Board believes that the Group has a number of 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 backlog, entry into new markets or a combination of these.  Until such time as 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 Strategy

The business strategy set out below is designed to deliver the Group's business objectives.

·     Accommodation Assets.  The Group will focus on placing existing accommodation assets into the market with an aim of generating sufficient revenues to at least cover overheads and service debt in the medium-to-long term;

·     Unique Selling Points.  The Group will focus on its key differentiator: the ability to rapidly deploy quality accommodation solutions on a semi-permanent basis;

·     Semi-Permanent Market.  The Group will focus on the Semi-Permanent market.  Execution and timing of new sales to generate revenues in this market will be a critical factor in the achievement of its business objectives.  Hybrid Semi-Permanent deployments (as described later in this Report) will be considered only if commercially viable;

·     Events Market.  The Group will continue with the Events market where commercially viable, making appropriate use of the Group's Snoozy accommodation assets and aiming for longer term deployments, however the number of events is likely to be substantially reduced compared to the 2015 season;

·     Sales Focus.  A careful balance of Semi-Permanent and Events deployments will be sought, with a keen focus on ensuring that the Group's key objectives are met in the short to medium term; and

·     Margins, Costs and Capex.  The Board believes there is an opportunity to improve gross margin and contribution to central overheads through careful and detailed sales and cost management, something that a newly recruited executive team have significant experience of delivering.  The Board has also commenced a plan to significantly reduce central overheads and, following cost reduction action taken in May and June 2016 now expects to enter 2017 with central overhead cash costs running at approximately £0.1m per month.  Capital expenditure will be limited in the short term to appropriate maintenance and enhancement expenditure that keeps the existing accommodation stock in good condition and in the medium-to-long term, where appropriate, in connection with firm new contracts for deployment.

The new executive team of experienced executives will be responsible for delivery of these strategies and managing the day-to-day operations and finances of the Group, reporting to the Board.

Business Model

The Group earns revenue from the provision of rapidly deployed quality accommodation to customers on a semi-permanent basis, either from the simple rental of accommodation stock to a customer for them to then operate (a "dry lease") or rental of accommodation stock where the Group is responsible for operating the accommodation.  In the past, the Group has operated accommodation for periods of over a year in the Semi-Permanent market and for three to fourteen days in the Events market.  The Group has also previously operated a Hybrid Semi-Permanent model, where accommodation is operated on one site to cover both an Events market and, outside of the on-site events timeline, a Semi-Permanent market.

As described in the Business Strategy section, going forward the Group will focus on Semi-Permanent long-term deployments for target periods in excess of twelve months and to increase the period of deployment in the Events market, where viable, from a few days to a few months or longer.  Hybrid Semi-Permanent deployments will be considered on a case-by-case basis.

Semi-Permanent

Longer term Semi-Permanent deployments typically involve the deployment of accommodation at one site for periods of twelve months or longer.  Formal planning permission may be required for these longer term deployments, depending on the circumstances, and where granted may have specific covenants or conditions attached.  In addition, some form of license or lease is generally required for occupation of the land.  New supporting and ancillary capital expenditure may be required to supplement the existing assets taking into account the particular circumstances of new customer deployment opportunities.

The Group has possession of and access to 570 V1 containerised rooms and 18 next generation V2 rooms on trailers for deployment to generate Semi-Permanent revenues.  Certain V1 containers were damaged and are omitted from the totals above.  All of the V1 assets 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 room can sleep at least two adults.

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.

Semi-Permanent deployments are either operated by the Group as dry leases, where the accommodation is operated by the customer, or on a full service basis, where the accommodation is operated by the Group.

·     Dry Lease.   The customer is responsible for operating the accommodation and is responsible 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; and

·     Full Service.  The Group is responsible for operating the accommodation and the responsibility for room occupancy falls into two models: 

The Group is responsible for room occupancy through its own sales efforts; or

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.

Events

During the year, the Group received the first batch of its new "Snoozy" pop-up rooms, commissioned to better address the Events market.   Snoozies are non-ensuite rooms that are more suited to the Events market, being less costly to transport, deploy and take down.

The Group is aiming to increase the term of deployment for its Snoozy accommodation assets in the Events market.  The Group will also consider similar longer term models to the Semi-Permanent Dry Lease and Full Service approaches described above.  Formal planning permission may be required depending on the circumstances of the deployment.  In addition, some form of license or lease is generally required for occupation of the land.

The Group owns 200 Snoozy rooms from which to generate Events revenues. Each room can sleep at least two adults.

The revenue model is similar to Semi-Permanent, with Dry Lease and Full Service options.

The Group can earn further revenues from each deployment through provision of additional services, such as food and drink.  These additional services, when managed well, can be a valuable source of additional margin.

Funding and going concern

Funding

As announced to the market on 26 April 2016, the Group initiated discussions with its primary lender in April 2016 seeking an amendment to its debt servicing obligations.   As reported in note 2 to the financial statements, the Group is in constructive discussions with its primary lender, who remains supportive of the Directors' strategy and plans.  The Directors expect a revised debt agreement to be agreed that amends the repayment profile of the debt to improve the Group's cash flows in the short to medium term. Throughout 2015 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.

 The Board intends to provide a further update on these discussions in due course.

Going concern

After making enquiries and taking account the Group's cash resources, future trading prospects and ongoing supportive discussions with its primary lender, 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 has changed significantly 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.

Current Trading and Outlook

Trading in the new financial year to 30 April 2016 has been broadly in line with the Board's expectations with an unaudited unadjusted EBITDA loss of approximately £0.5m.  The Board continues to take a more cautious view of trading for the balance of 2016 in the knowledge that, whilst the execution of a revised business strategy is underway, the Group's largest V1 contract came to an end, as expected, in June 2016.

Central overheads have been slowly reduced in the first half of 2016 (to £0.3m per month on average in the four months to April 2016) as we begin to realise the benefits of cost saving measures brought forward from 2015 and more recent action taken in 2016.  Execution of the Board's strategic plans will see these costs reduce far more significantly in the second half of 2016, with an aim of reducing central overhead cash costs to approximately £0.1m per month entering 2017 (2015: approximately £0.5m per month on average).

In 2016, capital expenditure on prospective new accommodation assets for existing and alternate vertical markets has been curtailed pending visibility of progress with the Group's key business objectives.  As a result, payments to acquire property, plant and equipment in the period to 30 April 2016 were immaterial (6 months to 30 June 2015: £2.5m and 12 months to 31 December 2015: £4.4m).  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 2016 was approximately £2.3m, comprising £8.7m debt, £5.1m of cash and cash equivalents and £1.3m of restricted cash (31 December 2015: £5.4m net debt, comprising £9.0m debt, £2.3m cash and cash equivalents and £1.3m of restricted cash).  Throughout 2015 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.

Semi-Permanent

Semi-Permanent revenues for the first quarter of 2016 were broadly as planned, arising from existing contracts secured in prior years, primarily from the major Falklands contract announced to the market on 21 November 2014.   As expected, the Falkland contract ceased generating revenues in June 2016 and the V1 rooms have been returned to the UK by the customer.  Following conclusion of this contract, the Group has one lower margin Semi-Permanent contract for 60 rooms remaining with a customer in Cornwall, which is subject to renegotiation in the second half of 2016.

The Group secured conditional planning permission for deployment of 240 rooms of Semi-Permanent accommodation in Barrow but based on current information, the Board has concluded that deployment is unlikely to proceed and as a result has excluded this opportunity from forecasts. 

A small number of other potential opportunities for Semi-Permanent accommodation are being explored, mostly carried forward from 2015 although at this stage the Board has excluded these from forecasts based on the level of uncertainty remaining. 

Work is also now underway to identify, qualify and secure new Semi-Permanent opportunities.  The Board has assumed that any such opportunities will not generate significant new revenues until at least Q4 2017 taking into account the Group's historic experience of long lead times and the current status of opportunity qualification.

Events

The Group expects to deploy accommodation at five UK Events in 2016 but does not expect the Events business to make a significant contribution to central overheads in 2016 because of the low margin available, even if the total number of Events were to be increased.  The Board is considering longer term deployment of Events accommodation for 2017 with revenue generation in the summer months.

Looking to the Future

2015 has been a very tough year for the Group and I am mindful that it has been an equally if not tougher one for shareholders, who have seen the value of their investment significantly diminished. 

Following a comprehensive strategic business review, we have commenced the execution of a strategy formed to deliver clear objectives that are aligned to the interests of shareholders and stakeholders more widely.

The Board believes that the Group has access to sufficient accommodation assets and market opportunity to achieve our short to medium term objectives.  Clearly we must now successfully execute the Group's strategic plans and, critically, secure customers to get these accommodation assets deployed earning target revenues and margins in as short a time as possible.

Whilst we have challenges ahead of us, we are now approaching these with a clear sense of purpose.  Our task is to improve the Group's fortunes for the longer term, recognising that our main challenge will be securing new customers in the short to medium term.  The appointment of a small team of experienced executives is designed to address these challenges head on and improve our chances of success. Concurrently, we will continue to work with our primary lender seeking an amendment to the debt repayment terms to place the Group on an improved financial footing.

 

I look forward to updating shareholders on progress as we move through 2016 and beyond.

 

 

Chris Errington
Executive Chairman
29 June 2016

Operating and Financial Review

Operating performance table

The following tables summarise the Group's operating performance:

Revenue-based performance

2015

2014

Variance


£m

£m

£m

%

Semi-Permanent

4.0

0.8

3.2

400%

Events

1.8

1.9

(0.1)

-5%

Total revenue

5.8

2.7

3.1

115%

Gross profit

3.3

1.8

1.5

83%

Logistics, deployment and equipment hire

(3.6)

(1.3)

(2.3)

177%

Contribution to central overheads

(0.3)

0.5

(0.8)

-160%

 

Earnings-based performance

2015

2014

Variance


£m

£m

£m

%

Statutory loss before tax as reported

(18.9)

(5.6)

(13.3)

238%

Adjustment for exceptional items (note 7 to financial statements)

9.9

0.4

9.5

2375%

Adjusted loss before tax

(9.0)

(5.2)

(3.8)

73%

Net interest payable

1.0

0.2

0.8

400%

Depreciation

1.9

1.4

0.5

36%

Share-based payments charge

0.1

0.0

0.1

100%

Adjusted EBITDA

(6.0)

(3.6)

(2.4)

67%






Loss after tax as reported

(18.9)

(5.6)

(13.3)

238%

Basic and diluted earnings per share (pence)

(8.91)

(3.09)

(5.82)

188%

 

Total revenue increased to £5.8m (2014: £2.7m) as a result of strong Semi-Permanent growth.  Contribution to central overheads was however reduced because of the negative impact of the Semi-Permanent Hybrid and Events business models, as discussed in more detail below.  Total contribution to central overheads worsened to a loss of £0.3m (2014: £0.5m profit).

The decline in contribution together with higher central overheads and exceptional costs gave rise to a loss after tax of £18.9m (2014: £5.6m) and a corresponding decline in earnings per share.

 

 

Business segment revenues and contribution to central overheads

The following table summarises the Group's operating segment performance:


Revenue


Contribution to central overheads


2015

£m

2014

£m

Var.

£m


2015

£m

2014

£m

Var.

£m

Semi-Permanent

3.5

0.1

3.4


1.7

0.1

1.6

Semi-Permanent Hybrid

0.5

0.7

(0.2)


(0.6)

0.0

(0.6)









Semi-Permanent Total

4.0

0.8

3.2


1.1

0.1

1.0









Events Total

1.8

1.9

(0.1)


(1.4)

0.4

(1.8)









Total

5.8

2.7

3.1


(0.3)

0.5

(0.8)

 

Semi-Permanent

During the year, the Group made strong progress in growing Semi-Permanent revenues having secured a new high margin contract with a corporate customer for the deployment and operation of 80 rooms earning revenues from February 2015 in the Falklands.  This contract demonstrates the Group's ability to rapidly deploy quality accommodation on a semi-permanent basis - in this case 80 rooms to a site some 8,000 miles from the UK - under a largely fixed price deal for the term of the deployment, which as noted came to an end in June 2016.  The Group also retained 60 rooms deployed at an attraction in Cornwall, which operates on a dry lease basis.  Alongside these deployments, the Group operated V1 accommodation assets on a Hybrid model at certain UK event locations.  The combination of these deployments generated total Semi-Permanent revenues of £4.0m (2014: £0.8m).

The Semi-Permanent deployments returned a strong contribution to central overheads of £1.7m (2014: £0.1m) whilst the Hybrid model's contribution to central overheads was severely impacted by the inefficiencies of this event based deployment model.  The Hybrid deployments generated £0.5m of revenue (2014: £0.7m) but the resulting contribution to central overheads was a loss of £0.6m (2014: £0m) dragging the contribution to central overheads from the Semi-Permanent segment as a whole down to £1.1m (2014: £0.1m).

The balance of V1 accommodation capacity for 2015 was made available to the Events business, with revenues and contributions reported in that segment.

The Group generated a number of new opportunities for deployment of V1 accommodation on a Semi-Permanent basis during the year but all of these opportunities deferred into 2016 and in the most part remain under commercial discussion, or the Group has subsequently withdrawn from the opportunity.

Events

The Group adopted a 'trailblazing' strategy to expanding the Events market in 2015, deploying accommodation at a handful of events where it had prior deployment experience and at a further thirty or so events in the UK and Europe that were largely new to the Group.  Total revenues from the Events segment declined slightly to £1.8m (2014: £1.9m) primarily because a number of major revenue generating events from 2014 did not repeat in 2015 and the new trailblazing events generated insufficient compensating revenues.

The early years of an Events engagement typically involve much lower revenue generation and higher costs and in the case of the trailblazing strategy adopted in 2015, high costs with little or no revenue. Even for the handful of events where the Group had prior year experience of deployment, the margin generated was relatively low, or even loss making. 

Whilst the Group's trailblazing strategy raised the profile of the Group in the events market, and more generally, it introduced significant strain and disruption to Group operations.  A combination of this disruption, the already anticipated high cost of event operation (given the dominance of early state events at low or negative margin) coupled with poor cost and project control led to a negative contribution to central overheads from Events of £1.4m loss (2014: £0.4m profit).

Central overheads

The following table summarises the Group's central overheads and resulting loss from operating activities:


Central overheads


2015

£m

2014

£m

Var.

£m

Contribution to central overheads from operations

(0.3)

0.5

(0.8)









Administrative costs before depreciation and exceptional costs

(5.8)

(4.1)

(1.7)





Depreciation charge

(1.9)

(1.4)

(0.6)

Exceptional costs (note 7 to financial statements)

(9.9)

(0.4)

(9.5)





Depreciation and exceptional costs

(11.8)

(1.8)

(10.0)





Total administrative costs

(17.6)

(5.9)

(11.7)





Loss from operating activities

(17.9)

(5.4)

(12.5)





Interest payable

(1.0)

(0.2)

(0.8)

Taxation

0.0

0.0

0.0





Loss after taxation

(18.9)

(5.6)

(13.3)

 

Administrative costs before depreciation and exceptional costs increased by £1.7m in 2015 primarily to support the Group's investment in the Events markets as described above.  The Group's depreciation charge increased in line with the capital expenditure timing profiles in 2014 and 2015.

Exceptional costs totalled £9.9m (2014: £0.4m) as explained further in note 7 to the financial statements.  The largest exceptional cost in 2015 was a £9.6m non-cash impairment charge recorded against the carrying value of the Group's fixed assets, further details of which are provided in note 11 to the financial statements.

Interest payable increased as the full impact of the Group's sale and leaseback of assets, in September 2014, and resulting loans and borrowings balance, came to bear.

 

 

Cash flows

The Group's increased trading losses coupled with higher capital expenditure and servicing of debt led to a significant cash outflow in the year of £13.3m (2014: £12.2m net inflow, following drawdown of £9.6m from the sale and leaseback and a share placing of net £9.6m).  These cash outflows significantly weakened the Group's financial position and led to the announcement of a new share placing in December 2015, with a net receipt of £4.5m from the share placing received post year end in January 2016. 

The Group incurred total capital expenditure of £4.4m (2014: £2.9m), approximately £2.8m of which related to new Snoozy and V2 accommodation for the Events market, £0.6m to V1 enhancements and an enhanced V1+ model together with a further £1.0m on ancillary equipment.

The Group serviced the capital element of its debt with a repayment of loans and borrowings cash outflow of £0.8m in the year (2014: £0.7m).

The Group ended the year with £2.3m of cash (2014: £15.6m) and £1.3m of restricted cash (2014: £1.3m).  The year-end cash balance excludes £4.5m net proceeds received in January 2016 from a placing of new shares, as described further in the Directors' Report under post balance sheet events.

Funding and net debt

On 2 September 2014, the Group entered into 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. The assets under lease included 578 rooms in the amount of £10m, which was drawn down in full on 24 October 2014.  The gross outstanding capital balance in connection with this facility at 31 December 2015 was £9.4m (2014: £10.1m) which is presented in loans and borrowings, net of approximately £0.4m of capitalised loan initiation costs (2014: £0.5m).

The Group also has a number of smaller finance lease obligations for hotel furniture and equipment and motor vehicles, with an immaterial outstanding capital balance at 31 December 2015 (2014: £0.6m).

Net debt at 31 December 2015 was £5.4m (2014: £7.2m net cash).  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 2015, the Group had gross unrecognised tax losses carried forward for offset against future trading profits of approximately £20m (2014: £13m) and gross unrecognised deferred capital allowances of approximately £6m (2014: £5m).  As a result, the Group is unlikely to be 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.

New product development and innovation

During the year, the Group continued to invest in the development of innovative accommodation solutions for existing and new vertical markets.  This included investment in developing prototypes of new V1 type accommodation, V2 second generation accommodation together with developments for the medical and social housing markets.

As part of its 2014/15 strategy to reduce the deployment cost of accommodation in the Events business, the Group completed the commissioned build of 200 Snoozy and 18 V2 rooms at a capital cost of approximately £3.0m.  The Group had planned to commission the build of a significantly higher number of V2 accommodation units as part of its strategy to address the Events market but poor trading and a resulting lack of access to capital curtailed the new build programme in the second half of 2015.

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.

In June 2016, the Directors carried out an assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.  The Board has attached more emphasis to the specific Group risks of adequacy of funding / liquidity and securing new customer revenues taking into account the operating and financial performance for 2015 (and the first part of 2016) and with site of the findings of the strategic business review described further in the Chairman's Statement section of this Strategic Report.   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 change in risk in year

Mitigation of risk

As referred to in the Strategic Report: The Group has historically been loss making with negative cash flows and this trend has so far continued into 2016; and The Group has a significant debt burden and a net debt financial position.  Failure to improve trading significantly in the short to medium term would raise doubts as to the adequacy of funding, liquidity and ultimately the Group's ability to service debt and continue as a going concern.

This risk increased because of the poor trading performance and significant capital expenditure in 2015, leading to a reduced cash balance and diminished operating cash generation prospects for 2016.  This has placed an increased strain on the Group's ability to service its debt obligations necessitating discussions with the primary lender.

In early 2016, the Board completed a comprehensive business review and has set new business objectives and strategies for the Group designed to complement the reasonable funding and liquidity available to the Group whilst also seeking to significantly improve trading performance.

Note 2 to the financial statements provides further information concerning adequacy of funding, liquidity and going concern.

Failure to grow new revenues

Impact on Group

Assessment of change in risk in year

Mitigation of risk

Growing new revenues is critical strategy to achieving the Group's key business objectives.  A failure to grow new revenues either to the target levels required or where they are delayed further into the future than planned, would jeopardise the Group's ability to deliver against its business objectives.

This risk has increased as cash reserves have been eroded through ongoing trading losses and high capital expenditure, shortening the period during which existing working capital is available to execute the strategic plan.

Additional strategic focus is now being placed on the markets and accommodation assets that the Board believes have the highest potential to grow new higher margin revenues.

The cost base and capital expenditure has been significantly reduced, consistent with delivery of the Group's overall objectives whilst balancing the delivery of a quality guest experience. 

 

 

Failure to control operational risks

Impact on Group

Assessment of change in risk in year

Mitigation of risk

Operational risks to be managed include: project risk (controlled delivery of new and existing projects), deployment (and extraction) risk and customer service risk (guest experience).  Failure to control 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.

This risk increased during 2015 as the Group expanded its operations.

During 2015, the operational risk profile increased ahead of the mitigating controls contributing to the poor trading results and financial position.

 

In 2016, the Board has made (and is making) changes to mitigate this risk through a clear strategic focus on business objectives and a significant reduction in operating activity in areas such as Events.  The introduction of experienced executive management is expected to significantly mitigate this risk from June 2016 onwards.

Failure to respond to market risks and competition

Impact on Group

Assessment of change in risk in year

Mitigation of risk

There is a risk that the market for the Group's product declines or that competition increases, reducing the ability to win work at all, or at appropriate margins. Failure to control this risk will have an adverse impact on the Group's ability to deliver against its business objectives.

This risk has not changed in the year.

The Group continues to focus on, and invest in, its key market and competitive differentiators of: (1) the ability to rapidly deploy accommodation to satisfy customer requirements and (2) provide accommodation that is at the upper end of the quality and 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 2016



 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015


Note

Year ended
31 Dec 2015
£'000

Year ended
31 Dec 2014
£'000

REVENUE

3

5,821

2,755





Cost of sales

3

(2,517)

(953)





GROSS PROFIT


3,304

1,802





Logistics, deployment and equipment hire

3

(3,557)

(1,346)





CONTRIBUTION TO CENTRAL OVERHEADS

3

(253)

456





Administrative expenses


(17,647)

(5,861)





ADJUSTED EBITDA


(5,960)

(3,582)





Exceptional items

4

(9,910)

(424)





Depreciation

6

(1,962)

(1,396)





Equity-settled share-based payment charge


(68)

(3)





LOSS FROM OPERATING ACTIVITIES


(17,900)

(5,405)





Finance income


25

42





Finance expenses


(1,009)

(273)





LOSS BEFORE TAXATION


(18,884)

(5,636)





Taxation


-

-





LOSS AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR


(18,884)

(5,636)





Loss per share - basic and diluted (pence)

5

(8.91)p

(3.09)p

 

 



 

Consolidated Statement of Financial Position

As at 31 December 2015


Note

2015
£'000

2014
£'000

ASSETS




NON-CURRENT ASSETS




Property, plant and equipment

6

8,537

15,671

Investments


-

-

TOTAL NON-CURRENT ASSETS


8,537

15,671





CURRENT ASSETS




Inventories


-

26

Trade and other receivables


1,527

1,376

Restricted cash and cash equivalents

10

1,281

1,277

Cash and cash equivalents

10

2,345

15,636

TOTAL CURRENT ASSETS


5,153

18,315





TOTAL ASSETS


13,690

33,986





LIABILITIES




CURRENT LIABILITIES




Trade and other payables


2,805

3,551

Loans and borrowings

7

1,097

539

TOTAL CURRENT LIABILITIES


3,902

4,090





NON-CURRENT LIABILITIES




Loans and borrowings

7

7,911

9,203

TOTAL NON-CURRENT LIABILITIES


7,911

9,203





TOTAL LIABILITIES


11,813

13,293





TOTAL NET ASSETS


1,877

20,693





EQUITY




Share capital


2,119

2,119

Share premium


37,009

37,009

Other reserve


718

718

Merger reserve


-

-

Retained earnings


(37,969)

(19,153)





TOTAL EQUITY


1,877

20,693

 



 

Consolidated Statement of Cash Flows

For the year ended 31 December 2015


Note

2015
£'000

2014
£'000

CASH FLOWS FROM OPERATING ACTIVITIES




Loss before taxation for the year


(18,884)

(5,636)

Depreciation

6

1,962

1,396

Fixed asset impairment charge

6

9,560

-

Equity-settled share-based payment adjustment


68

3

Net finance expenses


984

231

Decrease / (increase) in inventories


26

(17)

(Increase) in trade and other receivables


(151)

(946)

(Decrease) / increase in trade and other payables


(725)

1,622

NET CASH OUTFLOW FROM OPERATING ACTIVITIES


(7,160)

(3,347)





CASH FLOWS FROM INVESTING ACTIVITIES




Interest received


25

42

Payments to acquire property, plant and equipment


(4,387)

(2,853)

NET CASH USED IN INVESTING ACTIVITIES


(4,362)

(2,811)





CASH FLOWS FROM FINANCING ACTIVITIES




Drawdown of lease finance facility net of arrangement costs


-

9,553

Issue of equity shares net of issue costs


-

9,649

Interest paid


(961)

(102)

Repayment of finance lease creditors


(804)

(699)

NET CASH (USED IN) / GENERATED FROM FINANCING ACTIVITIES


(1,765)

18,401





NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS


(13,287)

12,243





Cash and cash equivalents at beginning of year


16,913

4,670





CASH AND CASH EQUIVALENTS AT END OF YEAR

10

3,626

16,913

 



 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015


Called up share capital
£'000

Share premium
£'000

Other reserve
£'000

Retained earnings

£'000

Total equity
£'000

AT 31 DECEMBER 2013

1,089

29,920

718

(15,050)

16,677

Loss and total comprehensive income for the year

-

-

-

(5,636)

(5,636)

Equity-settled share-based payment credit

-

-

-

3

3

Issue of new equity shares and warrants

1,030

7,740

-

1,530

10,300

Share issue costs

-

(651)

-

-

(651)

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







 



 

Notes to the preliminary financial information

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 2016.  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 2014 or 2015, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts: their report on the year ended 31 December 2015 was not qualified but did draw attention by way of an emphasis of matter to a material uncertainty related to the 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 2015:

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'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 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 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.

The audit report for the financial statements for the year ended 31 December 2014 did not draw attention to any matters by way of emphasis and was unmodified.

Neither the audit report for the year ended 31 December 2014 nor that for the year ended 31 December 2015 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 2015 and 2014.

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 2016, 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 2015:

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 2020 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. Secure customers to deploy the majority of existing V1 room assets on a Semi-Permanent basis in a phased manner prior to 31 December 2017, earning revenues and margins sufficient to cover the cash outflows associated with central overheads and servicing of debt;

·     Debt restructuring. Successfully conclude discussions with its primary lender regarding an amended debt repayment profile and restructuring of short term cash escrow requirements such that the Group has sufficient cash headroom; and

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 restructuring, as follows:

·     Deployment of the majority of the existing V1 room assets begins in the 4th quarter of 2017, earning revenues from that point in a phased manner moving into 2018.  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

Other matters considered

The Directors have, amongst other matters, also taken into account the following in forming their conclusions on the going concern assumption:

·     The Directors carried out a comprehensive review of the business in early 2016. The findings of this review are reported within the Chairman's Statement section of the Strategic Report. A key finding of this review was that the Group has a good stock of differentiated and viable accommodation assets and access to a reasonable market for those assets from which it should be able to generate sufficient revenues to cover overheads and service debt in the medium to long term.  Execution of new sales will be the key factor in the achievement of objectives;

·     The Group is in constructive discussions with its primary lender, who remains supportive of the Directors' strategy and plans.  The Directors expect a revised debt agreement to be agreed that amends the repayment profile of the debt to improve the Group's cash flows in the short to medium term. Throughout 2015 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;

·     In January 2016, the Group's cash resources were significantly increased from receipt of the £4.5m net proceeds of a new share placing;

·     Trading in the new financial year to 30 April 2016 has been broadly in line with the Board's expectations. The Board continues to take a more cautious view of trading for the balance of 2016 in the knowledge that, whilst the execution of a revised business strategy is underway, the Group's largest V1 contract came to an end in June 2016 as expected;

·     Central overheads have been gradually reduced in 2016 as we realise the benefits of cost saving measures, with unaudited central overheads for the four months to 30 April 2016 of approximately £1.0m (four months to 30 April 2015 of approximately £1.5m); and

Conclusion

Whilst there is uncertainty over the two critical assumptions in the forecast, 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.

 


2015


2014


Events

£'000

Semi-Permanent
£'000

Total

£'000


Events

£'000

Semi-Permanent
£'000

Total

£'000

REVENUE

1,783

4,038

5,821


1,939

816

2,755

Cost of sales

(1,182)

(1,335)

(2,517)


(532)

(421)

(953)

GROSS PROFIT

601

2,703

3,304


1,407

395

1,802

Logistics, deployment and equipment hire

(2,037)

(1,520)

(3,557)


(1,065)

(281)

(1,346)

CONTRIBUTION TO CENTRAL OVERHEADS

(1,436)

1,183

(253)


342

114

456

 

In 2015, revenues from a single customer totalled £3.2m which is reported in the Semi-Permanent segment. In 2014, revenues in the Events segment included revenues from two customers of £0.5m and £0.3m respectively.

Geographical Segments

Revenue and non-current assets by geographical area are as follows:


Revenue


Non-current assets


2015
£'000

2014
£'000


2015
£'000

2014
£'000

United Kingdom

2,592

2,468


7,403

15,671

Other European countries

-

287


-

-

Rest of the World - South Atlantic

3,229

-


1,134

-







Total

5,821

2,755


8,537

15,671

 

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


2015
£'000

2014
£'000

New product costs

-

275

Reorganisation costs

350

149

Tangible fixed asset impairment charge

9,560

-





9,910

424

 

5.    Loss per Share


GROUP


2015

2014

Loss per share (basic and diluted) - pence

8.91p

3.09p

 

Loss per share

2015


2014


Loss
£'000

Weighted average number of shares

Loss per share


Loss
£'000

Weighted average number of shares

Loss per share

 

Loss per share (basic and diluted)

18,884

211,840,727

8.91p


5,636

182,210,590

3.09p

 

All share options have been excluded when calculating the diluted EPS in both 2015 and 2014 as they were anti-dilutive.

6.    Property, plant and equipment

GROUP

Hotel Rooms £'000

Hotel Furniture & Equipment £'000

IT Equipment £'000

Motor Vehicles £'000

Total
£'000

Cost






AT 31 DECEMBER 2013

17,946

1,156

174

245

19,521

Additions

2,442

430

29

-

2,901

Disposals

(76)

-

-

-

(76)

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







Accumulated depreciation






AT 31 DECEMBER 2013

4,596

610

43

46

5,295

Charge for the year

1,118

171

47

60

1,396

Disposals

(16)

-

-

-

(16)

AT 31 DECEMBER 2014

5,698

781

90

106

6,675

Charge for the year

1,606

242

52

62

1,962

Impairment charge (note 7)

9,068

400

48

44

9,560

AT 31 DECEMBER 2015

16,373

1,423

190

212

18,197







Net book value






AT 31 DECEMBER 2015

8,096

357

43

41

8,537







AT 31 DECEMBER 2014

14,614

805

113

139

15,671

 

The net book value of assets held under finance leases included in the table above is as follows:

GROUP

Hotel Rooms £'000

Hotel Furniture & Equipment £'000

IT Equipment £'000

Motor Vehicles £'000

Total
£'000







Net book value






AT 31 DECEMBER 2015

5,274

7

-

37

5,318







AT 31 DECEMBER 2014

12,174

44

-

138

12,356

 

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 2015. As a result of this review, an impairment loss of £9.6m has been recognised in the financial statements for 2015.

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:


Semi-Permanent
CGU
£'000

Events

CGU
£'000

Corporate assets

£'000

Total NBV


£'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 2016 to 2018.  Future periods after 2018 are expected to repeat 2018 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:

Only cash inflows from continuing 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

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

A pre-tax discount rate of 23.4% has been applied to the Semi-Permanent CGU and 20.3% to the Events CGU cash flows.

Sensitivity analysis

Other than the fundamental sensitivity of the assumptions made over the timing and quantum of cash inflows from customers, 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 flows, for V1 accommodation deployment in the forecast by 3 months is to increase the overall impairment by £0.6m.  The effect of a 1% increase in the discount rate applied is to increase the overall impairment by £0.3m.

7.    Loans and Borrowings

The book value and fair value of loans and borrowings are as follows:


GROUP


2015
£'000

2014
£'000

NON-CURRENT



Finance lease liabilities

7,911

9,203


7,911

9,203




CURRENT



Finance lease liabilities

1,097

539


1,097

539




Total loans and borrowings

9,008

9,742

 

Borrowings are shown net of issue costs of £443,000 (2014: £526,000) 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 £70,000 (2014: £13,000).

8.    Lease commitments - Obligations Under Finance Leases

Future minimum lease payments and their present value under finance lease agreements were as follows:


GROUP 2015


GROUP 2014


Total finance lease £'000

Future interest charges
£'000

Capital element of finance lease
£'000


Total finance lease £'000

Future interest charges
£'000

Capital element of finance lease
£'000









Within 1 year

2,029

863

1,166


1,569

960

609

Between 1 and 5 years

7,956

2,225

5,731


8,044

2,776

5,268

After 5 years

2,770

217

2,553


4,970

592

4,378










12,755

3,305

9,450


14,583

4,328

10,255

 

Obligations under finance leases are stated gross of arrangement costs of £443,000 (2014: £526,000).

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. The assets under lease include 578 rooms in the amount of £10,000,000, which was drawn down on 24 October 2014.  Snoozebox Limited is the Group's borrowing party.

The embedded finance rate in the sale and leaseback agreement is 9.5% per annum, together with a fixed schedule of cash repayments for the term of the agreement. The Group has 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. The escrow balance has been reported as 'Restricted cash and cash equivalents'. At the initiation of the lease, £1.3m was placed into this escrow account where it attracts a nominal credit interest rate. The amount to be retained in escrow is 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 falls below a minimum multiple of annual rent payments, additional cash is added to the escrow account, and, where it falls above the minimum, cash may be withdrawn from the escrow account.

The Group is currently discussing the escrow, and other, requirements, with its primary lender, seeking an amendment to its obligations.

The lease finance is secured on the fixed assets included in the sale and leaseback arrangement.

The Company has no obligations under finance leases.

9.    Capital Commitments and Guarantees


2015
£'000

2014
£'000

Authorised and contracted - contracts for capital expenditure

50

653

 

The capital commitments in both years relate primarily to next generation (V2) Hotel room stock.

The Company has issued a parent guarantee in favour of the Group's primary asset based finance lender guaranteeing the obligations of the Company's subsidiary Snoozebox Limited.

10.  Notes Supporting the Cash Flow Statement

Cash and cash equivalents for the purposes of the cash flow statement comprise:


GROUP



2015
£'000

Restated
2014
£'000

Restricted cash and cash equivalents

1,281

1,277

Cash and cash equivalents

2,345

15,636





3,626

16,913

 

Cash and cash equivalents at 31 December 2014 has been restated to reflect cash held in a bank account at that date which, whilst held in the name of and operated by the Group, has a number of restrictions placed on it by virtue of the Lease agreement with the Group's primary lender and Lessor. 

11.  Post Balance Sheet Events

On 4 January 2016, the Company announced the successful completion of a placing of 83,333,400 new Ordinary Shares at 6.0 pence each to raise net cash proceeds of £4.5m.  These cash proceeds were received in January 2016 and accordingly are not reflected in the Group or Company balance sheet at 31 December 2015.

The Board began a comprehensive review of the business in Q1 2016 with a view to putting the Group on a more sustainable financial footing.   That review has now been completed and is discussed further in the Chairman's Statement section of the Strategic Report.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR PGUWGQUPQGMR
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Preliminary Results - RNS