Luminar Group Holdings plc Luminar More Than A Nightclub Annual Report & Accounts 2011 Annual Report Annual Report & Accounts for the year ended 26 February 2011 Stock code: LMR Luminar Group Holdings plc Luminar House Deltic Avenue Rooksley Milton Keynes MK13 8LW www.luminar.co.uk 20319.04 25/05/2011 Proof 6 20319.04 25/05/2011 Proof 6 Luminar Group Holdings plc www.luminar.co.uk Annual Report 2011 Welcome to Luminar Working to create the UK’s leading destination entertainment business. We run entertaining, popular venues where people can meet, eat, drink and dance. We do it responsibly and with care, creating memorable experiences that our customers love coming back to. With a branded estate of 77 venues as at 26 February 2011, we have the largest square footage of nightclub capacity in the country. Our Strategy Luminar has the best venues and the best operational capability in our sector. We remain confident that these strengths will continue to serve Luminar well, and that we can continue to enhance our position as the leading operator. Luminar venues welcome an average of over 200,000 customers through its doors every week. The Group’s strategy remains clearly focused on operational excellence and responding to customer demand, which will be achieved by: improving our operational template: improving our marketing function; driving efficiency at our head office function and improving the use of our assets. Financial Highlights Loss before tax* Total Revenue* Sales (per head) pre-exceptional items £137.3m £12.41 £1.1m (2010: £169.0m) (2010: £12.46) (2010: Profit £5.5m) Net cash inflow Gross margins* pre-exceptional items Net borrowings 81.4% £21.5m £82.2m (2010: 82.8%) (2010: £31.5m) (2010: £92.7m) * Continuing operations 20319.04 25/05/2011 Proof 6 20319.04 25/05/2011 Proof 6 Stock code: LMR Business Review Governance Consolidated Financial Statements Company Financial Statements Shareholder Information Operational Highlights During 2010, we have: Business Review partnered with Jongleurs to run comedy 02 Chairman’s Statement 04 Business Review nights across 4 of our clubs with another 8 11 Financial Review to follow in 2011; introduced premium brand drinks and cocktails into our clubs for the first time; partnered with Ministry of Sound to run events under their well-known dance Governance 13 Corporate Social Responsibility brands Hed Kandi and Dance Nation; 18 Board of Directors launched live entertainment into many of 19 Corporate Governance Statement 25 Remuneration Report our clubs which delivered tours in 2010 33 Report of the Directors from Calvin Harris, Example and Katy B; and opened PROJECT nightclub in Norwich, our first in 2 and a half years. Consolidated Financial Statements 39 Independent Auditors’ Report 41 Consolidated Income Statement 41 Consolidated Statement of Comprehensive Income 42 Consolidated Balance Sheet 43 Consolidated Cash Flow Statement 43 Consolidated Net Debt Statement 44 Consolidated Statement of Changes in Shareholders’ Equity 45 Principal Accounting Policies for the Consolidated Financial Statements 53 Notes to the Consolidated Financial Statements Company Financial Statements 82 Independent Auditors’ Report 84 Company Balance Sheet 85 Principal Accounting Policies for the Company Financial Statements 89 Notes to the Company Financial Statements Shareholder Information 97 Notice of Annual General Meeting 102 Explanatory Notes to the Notice of Annual General Meeting 104 Shareholder Information 01 20319.04 25/05/2011 Proof 6 Luminar Group Holdings plc www.luminar.co.uk Annual Report 2011 Chairman’s Statement John Leach Chairman OVERVIEW AND STRATEGY Despite the challenging trading conditions, the “We would The late night dancing market has continued Group has made progress in catering for the to be difficult with factors such as the demands of our customers through a number of economic environment, high levels of initiatives. This is evidenced by the introduction like to thank youth unemployment and lower disposable of cocktails, premium branded drinks, branded incomes, together with a highly competitive sessions and new entertainment such as all our staff market and severe adverse weather Jongleurs comedy evenings. conditions during peak trading periods, who have contributing to the challenges. RESULTS The results are set out in the financial The financial results for the year ended statements on pages 41 to 44. They are also risen to the 26 February 2011 reflect these trading discussed in the Business Review on pages conditions. As a result, it has been necessary 4 to 12. challenge of to impair certain tangible asset values and reduce the level of goodwill that is CORPORATE SOCIAL RESPONSIBILITY recognised on the balance sheet. Since The Group’s Corporate Social Responsibility repositioning refinancing in December 2010, the Group Statement is set out on pages 13 to 17. has maintained its strong relationship our Company with its Banking Group, comprising Lloyds The Group’s activities are principally in the TSB, Barclays Bank plc and the Royal Bank late night market for entertaining, dancing in the of Scotland (“Banking Group”), which and drinking. The Group places considerable has continued to support the business, emphasis on developing, maintaining and the management and the strategy, monitoring policies and processes designed changed as demonstrated by them granting a to protect the well-being and welfare of prospective waiver of the financial covenants, customers and employees. The Group is also market which would fall to be tested at the end of committed to taking into account the interests May 2011. In addition, the Banking Group are of the communities in which it operates. continuing to provide flexibility to maintain environment.” the Group’s liquidity levels until 31 August BOARD CHANGES 2011 and agreed to continue dialogue with As reported in last year’s Annual Report, Luminar and to work together with the Stephen Thomas left the Board on 1 March Group with a view to agreeing by that date a 2010. He was the Chief Executive Officer longer term restructuring of the Group’s debt and founder of Luminar, Robert McDonald arrangements. These measures have been (Finance Director) left the Board on 1 June necessary to address the impact of severe 2010 and Alan Jackson stepped down as adverse weather conditions experienced Chairman on 13 July 2010. in December combined with the continued deterioration in market conditions which together have placed significant stress on financial covenants. 02 20319.04 25/05/2011 Proof 6 Stock code: LMR Business Review Governance Consolidated Financial Statements Company Financial Statements Shareholder Information Pictured: 1 Oceana Milton Keynes. 2 Oceana Plymouth. 1 2 Simon Douglas joined the Board in March CURRENT TRADING Average footfall 2010 as Chief Executive Officer (“CEO”). Current trading remains difficult. Same outlet Simon has a strong track record in the leisure sales for the first nine weeks of the financial (per week) and entertainment sector, including various year were 13.9% below the same period last management roles at HMV, Virgin Retail and year reflecting a continued improvement in latterly as CEO in leading the MBO of Zavvi, like for like trends despite trading over the 212,000 where he extracted considerable shareholder Easter and Royal Wedding weekends. value from the business. (2010: 267,000) DIVIDEND John Leach joined the Board as a Non- No interim dividend was paid and no final Executive Director on 30 April 2010 and dividend has been recommended. became Chairman on 13 July 2010. John has wide experience of both the leisure sector John Leach Average sales per and most recently the City where from 2003 Chairman to 2008 he was involved in various roles 11 May 2011 customer and latterly as CEO of Hermes Focus Asset Management Limited. Prior to this he was Chairman of Orbis Plc, Waterhall Group Plc and £12.41 Brent Walker Group, where he was CEO from (2010: £12.46) 1994 to 1998 and CFO from 1991 to 1994. Philip Bowcock joined the Board as Finance Director on 1 June 2010 from Barratt Developments plc, where he was Group Financial Controller. Prior to this, he held senior finance roles at Tesco and Hilton Group. 03 20319.04 25/05/2011 Proof 6 Luminar Group Holdings plc www.luminar.co.uk Annual Report 2011 Business Review Simon Douglas Chief Executive OPERATIONAL BUSINESS REVIEW maximise the return on our assets. The “As our core As at 26 February 2011, Luminar operated initiatives include partnering with Jongleurs 77 late night venues in 72 towns and cities. to run comedy nights across 12 of our clubs, This continues to be the largest estate of its building a corporate sales team with the aim customers’ kind in the UK. Luminar clubs trade under 3 of delivering incremental business, further main brands Oceana, Liquid and Lava & Ignite diversifying the music offering by partnering prospects are and we also operate a number of nightclubs with Ministry of Sound, introducing quality outside of these brands. live acts into clubs and launching our first challenged, ever cocktail range throughout the estate. Our customers are predominantly in the We are confident that these initiatives 18–24 year age Group, including many pave the way to enable the Group to offer it is vital that students, although with the introduction of a comprehensive late night entertainment new initiatives such as Jongleurs comedy proposition. We are encouraged by early we look to nights we are attracting a wider audience. indications that these initiatives are driving footfall and spend per head. Primary income streams are from the sale broaden our of drinks (67.2%) and admission charges on In view of the challenging market conditions, entry (24.9%). the Group continues to control costs tightly. audience Capital investment was kept to a minimum During the year ended 26 February 2011, across although, during the year, we did see the with the an estate that has been reduced by 10 clubs, completion of PROJECT.