Half Yearly Report

RNS Number : 4140M

Stagecoach Theatre Arts PLC

29 January 2009

 



Stagecoach Theatre Arts plc (STA.L)

('Stagecoach' or 'the Group')

Interim Results

for the half year ended 30 November 2008

'Stagecoach Theatre Arts plc operates the UK's largest franchise network of part-time performing arts schools for children aged between 4 and 16'

Highlights

Financial

• Profit before tax up 28 per cent to £0.33 million (2007: £0.26m), reflecting an increase in continuing franchise fees from the existing schools network and the continuing financial contribution from the restructuring and cost reductions undertaken over the past two years.

• Franchise network fees (ie. underlying school fees throughout franchise network) up 6 per cent to £13.3m (2007: £12.6m) reflecting continuing solid performance of franchisees worldwide.  Group revenue of £3.05 million (2007: £3.09 million) reduced marginally, reflecting fewer initial franchise fees from new school sales and re-sales.  
  

• Healthy cash balance at half year end increased 17 per cent to £1.4m (2007: £1.2m).
  

• Earnings Per Share substantially up by 47 per cent to 2.5p (2007: 1.7p).  

• Maiden Interim Dividend payable of 0.5 pence per share (2007: nil).  

Operations

• This year saw a Stagecoach Agency FIRST - every West End musical that has children in the cast has featured at least one Stagecoach student.  
  
  
• October launch of Stagecoach Parties, offered as an additional activity for our Stagecoach franchisees, which helps with marketing as well as to provide a supplemental income.
  
  
• Potential new revenue stream is the development of a new performing arts course for 16 to 18 year olds, to run concurrently with a student's academic studies.  
  
  
• Stagecoach USA subsidiary moves into profit for the first time.
  
  
• In September, the first Stagecoach school was opened in Athens, Greece, under an international licence agreement. We are delighted to report that the school opened with a full register.

David Sprigg, Managing Director, commented:

'We are pleased with the financial results for the first six months of the year and our reported 28 per cent. increase in profits, against what is an increasingly tough economic climate.  Our experience over the past twenty years has been that children's education is one of the last items of expenditure to be cut from the family budget.

Despite the difficulties that 2009 will undoubtedly bring, we remain cautiously optimistic.'

ENDS

Enquiries:

Stagecoach Theatre Arts Richard Dawson, Finance Director and Investor Relations	Tel: [phone] www.stagecoach.co.uk
Smith & Williamson Corporate Finance Limited - Nominated Adviser David Jones / Siobhan Sergeant	Tel: [phone]
Public Relations, Adventis Financial PR Tarquin Edwards	Tel: [phone]

Chairman's Statement

Results and Overview

I am pleased to report a 28% increase in profits for the six months to 30 November 2008 to £333,000 (2007: £261,000). Despite the uncertain global economic climate, the total number of students in the Group's schools has increased marginally to 40,112 (2007: 40,040). Network fees, which reflect total school fees earned over the period by our franchisees, have increased 6% to £13.3 million (2007: £12.6 million).

Continuing franchise fees from the existing schools network have increased over the period but there have been fewer initial franchise fees from new school sales and re-sales and, as a result, Group revenue has reduced marginally to £3.05 million (2007: £3.09 million). However, the continuing financial contribution from the restructuring and cost reductions undertaken over the past two years has resulted in the overall increase in profitability during the period.  

Group cash balances increased 17% to £1.4 million as at 30 November 2008 (2007: £1.2 million). Earnings per share for the six month period were up 47% to 2.5 pence (2007: 1.7 pence). Last year, the Company initiated the payment of a final dividend and we are pleased to announce the payment of a maiden interim dividend of 0.5 pence per share (2007: nil). This interim dividend which amounts to £49,397 will be paid on 18 March 2009 to those shareholders on the register as at 20 February 2009.

Operational Performance

UK Schools

The number of Stagecoach Theatre Arts schools in the UK and students attending have increased in comparison to last year to 625 schools, 712 Early Stages classes and 35,821 students (2007: 615 schools, 678 Early Stages classes and 35,571 students).

There has been a small decrease in average student numbers per main school to 41.9 students (2007: 42.7) and Early Stages to 13.2 (2007: 13.4), although over 93% of all available places are still taken.

The integration of the SportsCoach and Mini Stages franchises into the Stagecoach UK support and reporting function has been successful and has resulted in a small operating profit. Despite a number of SportsCoach and Mini Stages school closures, this restructuring has also increased average student numbers per school. 

The SportsCoach network has 24 SportsCoach schools, 8 Early Sporties Classes and 1,000 students (2007: 27 schools, 10 Early Sporties and 1,097 students). There are 349 Mini Stages students and 104 Montessori nursery students (2007: 665 and 84 students respectively). We were delighted to receive an accreditation of Excellence from OFSTED for our Montessori school.

From October, Stagecoach Parties was offered as an additional activity for our Stagecoach franchisees, to help with marketing, as well as to provide a supplemental income. So far 35 of our franchises have paid the annual licence fee for the rights to run Stagecoach Parties. Stagecoach Parties are a fun, structured party for children of all ages, predominantly run as a child's birthday party activity, held either at their home or in a local hired venue.  

Another potential new revenue stream is the development of a new performing arts course for 16 to 18 year olds, to run concurrently with a student's academic studies. This two-year course is scheduled to commence in September 2009.  

The Stagecoach Agency maintains its status as the largest performing arts agency for children in the UK and continues to provide our students with varied work across all areas of the entertainment industry. Our September 2008 intake numbered 2,043 (2007: 2,137). The total of individual submissions for jobs from August 2007 to September 2008 was over 16,000, resulting in approximately 5,000 auditions and bookings.  

The jobs have become more varied and high profile and this year saw a Stagecoach Agency first, in that every West End musical that has children in the cast has featured at least one Stagecoach student. We are in the process of raising our profile in the lucrative Voice Over market, in which we should excel because of our unique nationwide pool of regional and ethnic voices.

Overseas schools

Following the restructuring of the US operations in May 2008, we are pleased to announce that the Stagecoach USA subsidiary reported a profit before tax for the first time.

The German operations continue to expand steadily with two new schools. However further growth is needed in order to achieve the critical mass required for the German subsidiary to move into profitability.

In September, the first Stagecoach school was opened in Athens, Greece, under an international licence agreement. We are delighted to report that the school opened with a full register.

In our overseas markets there are now 52 Stagecoach schools, 55 Early Stages classes, 3 Further Stages classes, 12 Mini Stages sessions and a total of 2,838 students (2007: 46 Stagecoach schools, 47 Early Stages classes, 4 Further Stages classes, 13 Mini Stages sessions and a total of 2,623 students).

Creative and Educational

We have enjoyed a busy six months for large-scale performances and events. In June a national choir festival at the Birmingham symphony hall featured over 400 Stagecoach students from around the UK. Also in June over 300 students performed at Her Majesty's Theatre in London's West End. In August we staged our annual showcase, the musical Children of Eden at the Leatherhead Theatre featuring students from schools in the UK, Ireland, USA and Germany. In November, another 300 Stagecoach students again performed at Her Majesty's Theatre. In December, 80 Stagecoach schools and an estimated 3,600 Stagecoach students simultaneously performed the musical piece, entitled 'Glad Rags', for a Guinness World Record attempt (of which we are awaiting confirmation).

Strategy

Your Board has been committed to the strategy of bringing each part of our business to profitability. With the US subsidiary moving into profit this half year, only the German subsidiary remains loss making. Despite the current difficult economic climate which has caused a slow down in new school sales in Germany, we continue to invest in this market taking a medium to long term view that Stagecoach Germany has the most potential to imitate the success of Stagecoach UK.

Our key strategic objectives are:

• further growth in the UK; assisted by new income streams from the core business such as Stagecoach Parties, the on-line shop (www.stagecoachshop.co.uk), and our new performing arts course for 16 to 18 year olds

• growth from our other networks (International, SportsCoach)

• maintain a tight management of costs, and thus to build up the cash reserves further

• continue to provide a return to shareholders with a progressive dividend policy  

The Group also continues to support the Stagecoach Charitable Trust, which runs InterAct Theatre Workshops, providing inclusive performing arts tuition to children of all abilities and needs.

Prospects

We are pleased with the financial results for the first six months of the year in this increasingly tough economic climate.  Our experience over the past twenty years has been that children's education is one of the last items of expenditure to be cut from the family budget.

However, we are not immune from the lack of credit: the banks' unwillingness to lend as they have in the past will inevitably reduce the number of franchise sales and re-sales and therefore that portion of our income. Nor are we entirely immune to the effects of recession: the economic climate has already led some franchisees to postpone plans to expand their businesses and redundancies may result in loss of students, reducing revenue to our franchisees and ourselves. We have therefore increased our marketing and promotional activity and are strongly encouraging all our franchisees to do likewise in order to maintain student numbers. In other areas we are continuing with cost reductions wherever possible.  

Despite the difficulties that 2009 will undoubtedly bring we remain cautiously optimistic.

Graham Cole

Chairman

29 January 2009

Unaudited Condensed Consolidated Income Statement

For the six month period ended  30 November 2008		Six months ended			Year ended
		30 Nov		30 Nov	31 May
		2008		2007	2008
	Notes	£'000		£'000	£'000
Network fees (see note)		13,275		12,627	28,466
Revenue	2	3,054		3,099	6,326
Cost of sales		(1,807)		(1,798)	(3,177)
Gross profit		1,247		1,301	3,149
Other operating income		12		13	30
Administrative expenses		(950)		(1,053)	(2,482)
Operating profit	2	309		261	697
Financial income		28		7	22
Financial expenses		(4)		(7)	(12)
Net financing income		24		-	10
Profit before tax		333		261	707
Taxation	3	(90)		(90)	(206)
Profit for the period		243		171	501
Attributable to:
Equity holders of the parent		243		171	501
Earnings per share (pence)
Basic earnings per share	5	2.5		1.7	5.1
Diluted earnings per share	5	2.4		1.7	5.0

Note: Network fees represent total school fees earned over the period by our franchisees from over 40,000 students that attended Stagecoach, SportsCoach and Mini Stages worldwide.

Unaudited Condensed Consolidated Statements of Recognised Income and Expenses

For the six month period ended 30 November 2008	Six months ended			Year ended
	30 Nov		30 Nov	31 May
	2008		2007	2008
	£'000		£'000	£'000
Foreign exchange translation differences	(1)		1	(22)
Net income/(expense) recognised directly in equity	(1)		1	(22)
Profit for the period	243		171	501
Total income and expense recognised for the period attributable to equity holders of the parent	242		172	479

Unaudited Condensed Consolidated Balance Sheet

As at 30 November 2008

		Six months ended			Year ended
		30 Nov		30 Nov	31 May
		2008		2007	2008
		£'000		£'000	£'000
Non-current assets
Property, plant and equipment		98		92	100
Intangible assets - Goodwill		981		981	981
Intangible assets - Computer software		330		460	395
Total non-current assets		1,409		1,533	1,476
Current assets
Inventories		296		327	303
Trade and other receivables		1,178		1,016	2,340
Cash and cash equivalents		1,380		1,243	1,032
Total current assets		2,854		2,586	3,675
Total assets	2	4,263		4,119	5,151
Equity
Share capital		494		494	494
Share premium		1,601		1,601	1,601
Translation reserve		(36)		(12)	(35)
Retained earnings		961		584	916
Total equity		3,020		2,667	2,976
Non-current liabilities
Other interest-bearing loans and borrowings		25		83	50
Other payables		-		15	-
Deferred tax liabilities		16		64	16
Total non-current liabilities		41		162	66
Current liabilities
Other interest-bearing loans and borrowings		59		63	66
Trade and other payables		1,143		1,227	2,043
Total current liabilities		1,202		1,290	2,109
Total liabilities	2	1,243		1,452	2,175
Total equity and liabilities		4,263		4,119	5,151

Unaudited Condensed Consolidated Cash Flow Statement

For the six month period ended 30 November 2008

	Six months ended			Year ended
	30 Nov		30 Nov	31 May
	2008		2007	2008
	£'000		£'000	£'000
Cash flows from operating activities
Profit for the period	243		171	501
Adjustment for:
Depreciation and amortisation	77		77	159
Foreign exchange differences	(8)		(1)	(41)
Financial income	(28)		(7)	(22)
Financial expense	4		7	12
Loss on disposal of property, plant and equipment	1		-	8
Employee share option scheme	-		6	8
Taxation	90		90	206
Operating profit before changes in working capital and provisions	379		343	831
Decrease/(increase) in trade and other receivables	1,183		914	(393)
Decrease/(increase) in inventories	8		(29)	(5)
(Decrease)/increase in trade and other payables	(665)		(194)	623
Cash generated from the operations	905		1,034	1,056
Interest received	28		7	22
Interest paid	(4)		(7)	(12)
Taxation paid	(258)		-	(167)
Net cash from operating activities	671		1,034	899
Cash flows from investing activities
Acquisition of additional shares in subsidiary	(82)		(84)	(99)
Acquisition of property, plant and equipment	(11)		(15)	(48)
Net cash used in investing activities	(93)		(99)	(147)
Cash flows from financing activities
Dividends paid	(198)		-	-
Repayment of borrowings	(32)		(33)	(61)
Net cash used in financing activities	(230)		(33)	(61)
Net increase in cash and cash equivalents	348		902	691
Cash and cash equivalents at beginning of the period	1,032		341	341
Cash and cash equivalents at end of the period	1,380		1,243	1,032

Notes to the Condensed Financial Statements 

For the six month period ended 30 November 2008

1.  Accounting Policies 

General

Stagecoach Theatre Arts plc is a company incorporated in the UK.

The condensed consolidated interim financial statements for the six months ended 30 November 2008 consolidate those of the Company and its subsidiaries (together referred to as the 'Group').

The comparative figures for the financial year ended 31 May 2008 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

Basis of preparation

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.  

The same accounting policies and presentation methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 31 May 2008. 

  Measurement convention

The financial statements are presented in sterling, rounded to the nearest thousand and are prepared on the historical cost basis.

Use of estimates and judgements

The preparation of financial statements in conformity with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs') requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

2.  Segment Reporting

Primary reporting format - business segments

The Group operates as one business segment, franchising (Stagecoach, including the Stagecoach Agency, SportsCoach and Mini Stages). This is the Group's primary segment, as no other activities are significant enough to report separately. The unallocated segment relates to a nursery school business and corporate overheads, assets and liabilities.

The segment results for the periods are as follows:

	Six months ended						Year ended
	30 Nov 2008			30 Nov 2007			31 May 2008
	Franchising	Unallocated	Total	Franchising	Unallocated	Total	Franchising	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Network fees	13,119	156	13,275	12,498	129	12,627	28,207	259	28,466
Revenue	2,898	156	3,054	2,970	129	3,099	6,067	259	6,326
Operating profit/(loss)	1,087	(778)	309	1,004	(743)	261	2,546	(1,849)	697
Total assets	2,786	1,477	4,263	2,763	1,356	4,119	3,955	1,196	5,151
Total liabilities	(570)	(673)	(1,243)	(805)	(647)	(1,452)	(1,513)	(662)	(2,175)
Other segment items:
Capital expenditure	1	10	11	15	-	15	45	3	48
Depreciation and amortisation	69	8	77	70	7	77	142	17	159

Secondary reporting format - geographical segments

The Group's operations are based in four main geographical areas. The UK is the home country of the Parent Company. Revenue is analysed on an origination basis and is all derived from external customers. Segment assets, which comprise total assets, including capital expenditure, are allocated on the basis of location.  

The main operations in the principal territories for the periods are as follows:

	Network fees			Revenue			Operating profit/(loss)
	Six months  ended		Year ended	Six months  ended		Year ended	Six months  ended		Year ended
	30 Nov	30 Nov	31 May	30 Nov	30 Nov	31 May	30 Nov	30 Nov	31 May
	2008	2007	2008	2008	2007	2008	2008	2007	2008
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
United Kingdom	12,587	12,132	27,120	2,943	3,006	5,997	320	362	821
Europe	564	345	1,004	80	45	205	(18)	(77)	(53)
Americas	100	128	289	27	44	115	4	(28)	(78)
Rest of the world	24	22	53	4	4	9	3	4	7
	13,275	12,627	28,466	3,054	3,099	6,326	309	261	697

	Segment assets			Capital expenditure
	30 Nov	30 Nov	31 May	30 Nov	30 Nov	31 May
	2008	2007	2008	2008	2007	2008
	£'000	£'000	£'000	£'000	£'000	£'000
United Kingdom	4,009	3,950	4,945	10	15	46
Europe	156	87	147	1	-	2
Americas	98	82	59	-	-	-
Rest of the world	-	-	-	-	-	-
	4,263	4,119	5,151	11	15	48

3.  Taxation

The income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year individually for each tax jurisdiction in which the Group operates and applied to the pre-tax profits of the relevant entity. 

	Six months ended			Year ended
	30 Nov		30 Nov	31 May
	2008		2007	2008
	Unaudited		Unaudited	Audited
	£'000		£'000	£'000
UK taxation	90		90	206

4.  Dividends

	Six months ended			Year ended
	30 Nov		30 Nov	31 May
	2008		2007	2008
	Unaudited		Unaudited	Audited
	£'000		£'000	£'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 May 2008 of 2p per ordinary share (2007: £nil). The final dividend was approved by shareholders at the AGM on 17 September 2008 and paid on 25 November 2008.	198		-	-

There is an interim dividend payable of 0.5 pence per share (2007: nil). This interim dividend which amounts to £49,397 will be paid on 18 March 2009 to those shareholders on the register as at 20 February 2009.

5.  Earnings per share

	Six months ended			Year ended
	30 Nov		30 Nov	31 May
	2008		2007	2008
	Unaudited		Unaudited	Audited
Earnings
Profit for the period for basic and diluted earnings per share (£'000)	243		171	501
Number of shares
Weighted average number of shares used for basic earnings per share ('000)	9,879		9,879	9,879
Dilutive effect of share options ('000)	113		113	106
Fully diluted weighted average number of shares used for diluted earnings per share ('000)	9,992		9,992	9,985
Basic earnings per share (pence)	2.5		1.7	5.1
Diluted earnings per share (pence)	2.4		1.7	5.0

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue by the number of shares deemed to be issued for no consideration (options granted to employees).

6.  Related Party Transactions 

The directors consider there to be no one individual or entity that ultimately controls the Group.

Directors of the Company and their immediate relatives control 59.93% of the voting shares of the Company. Directors' rights to subscribe for shares in the company are indicated below:

	Date of Grant	Exercise Price	Number of options	Dates when exercisable
Richard Dawson	21 Oct 01	42p	47,786	14 Dec 01 to 21 Oct 11
	27 Jan 05	67.5p	100,000	31 May 07 to 27 Jan 15
	4 Oct 06	32.5p	100,000	31 May 07 to 4 Oct 16
Manzoor Ishani	5 Aug 02	112.5p	44,444	5 Aug 05 to 4 Aug 12
	27 Jan 05	67.5p	100,000	31 May 07 to 27 Jan 15
	4 Oct 06	32.5p	100,000	31 May 07 to 4 Oct 16

No options held by Directors were exercised during the period and no options held by Directors lapsed during the period. The mid-market price of the shares at 30 November 2008 was 54 pence and the range during the period was 54 to 72 pence. 

During the period the directors' remuneration including benefits in kind was £321,312 (30 Nov 2007: £279,980). 

Manzoor Ishani has an interest in Sherrards, a firm of solicitors that the Company contracts with from time to time for legal services.

The Group continues to support and provide management time to the Stagecoach Charitable Trust (SCT), the trustees of which include Stephanie Manuel and David Sprigg. During the period the Group donated £29,420 to SCT (30 Nov 2007: £16,694).  

7.  Responsibility 

The Directors of the company accept responsibility for the information contained in this document and to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

8.  Parent Company Accounting Policies

In the last annual accounts, in relation to the parent company balance sheet (which is not included in these interim statements), the accounting policy included a disclosure to the effect that the accounting treatment involved the true-and-fair override of an accounting requirement of the Companies Act 1985. This disclosure was inappropriate since the Companies Act 1985 accounting provisions do not apply as the parent company prepared its accounts in accordance with EU Adopted IFRSs; the accounting adopted continues to apply but the true-and-fair override disclosure, made in error, will be removed from the next annual accounts.

 

END

 

 

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