NEWBURY RACECOURSE PLC – Preliminary Results

Newbury Racecourse plc, the racing, entertainment and events business, today announces its preliminary results for the twelve months ended 31 December 2019.

“Looking back, 2019 provided another fascinating and thrilling racing programme at Newbury with our highest paying attendance in five years, including two very successful Party in the Paddock events. The year saw further positive financial growth in a number of key areas of the business whilst we also completed the next stage of our redevelopment of the external heartspace areas of the racecourse.

However, the current situation we now find ourselves in, due to the COVID-19 pandemic, is very different for the country and our business. We have implemented a number of positive actions to mitigate against the revenue shortfall created by the forced closure of trading activities since the March lockdown. Despite this we still expect to suffer significant losses and a depletion of our cash resources through 2020 and into 2021, but we remain confident that the actions we have taken and committed to take will protect the business and our ability to trade as a going concern.

Beyond this, the redevelopment still provides a first class venue that will enable us to continue to host racing and other events  of the highest quality in the future, as well as having facilities that remain well placed to meet the increasing demands of our customers, from horsemen and racegoers, to conference and hotel guests, nursery patrons and local residents as and when we are able to welcome them back to the racecourse.”

Newbury Racecourse plc                                                                  Tel: 01635 40015

Hudson Sandler                                                                                 Tel: 020 7796 4133

As I write this statement the news is still dominated by the ongoing coronavirus pandemic and the financial and operational impact this has had, and will continue to have, on the business. The British Horseracing Authority’s decision to suspend all horseracing in the UK with effect from 17th March has been enormously disruptive to the business, and while we were delighted to be able to restart racing ‘Behind Closed Doors’ in June, the financial impact of the loss of a number of racedays and racing crowds has been severe. We continue to develop our detailed forecasts to help us to understand and respond to the constantly changing environment, but there remains significant uncertainty regarding the ongoing impact of Covid-19 on the business. It is our belief that these financial statements are properly prepared on a going concern basis.

The major investment we have made into our racecourse facilities and infrastructure over recent years has been to position Newbury Racecourse for the future, in line with our strategic objective to be a modern and leading racecourse, entertainment and events business. We entered 2020 with ambitious targets and a clear strategy to drive further growth in our business and I am confident that the Company is in a secure position to trade through the current crisis. We will then be well placed to resume normal trading activities as soon as it is safe and permitted to do so. I cover this in more detail below.

2019 Financial Performance

Total turnover grew by 3% to £19.84m in 2019. We saw top line growth across all areas of the business, with a like for like increase in racing revenues of 2%, together with a 25% growth in our Conference and Events business (off the back of 22% growth in 2018). It was also a solid year for the Rocking Horse Nursery with a 3% revenue growth and a 21% increase in revenue generated from The Lodge hotel operation.

Operating profits were £0.6m in the year (2018: £1.76m), which was net of exceptional losses of £0.4m (2018: exceptional profits £0.92m). Profit after tax was £0.63m (2018: £1.79m).
 

Racing Highlights

The 2019 racing programme was another fascinating and thrilling year with our highest paying attendance in five years, due mainly to two successful Party in the Paddock events.

February’s Betfair Saturday was regrettably abandoned as a result of the equine influenza outbreak, but it was an insured fixture, so the financial loss was partly mitigated. We were delighted to host the retiring Noel Fehily at our finale meeting at the end of March which saw most of Lambourn descend on Newbury to wish him well.

The 2019 flat season got underway with the Dubai Duty Free Spring Trials Weekend and we were once again delighted to welcome Her Majesty The Queen for the afternoon. We achieved competitive renewals of both the Watership Down Stud Greenham Stakes as well as the Dubai Duty Free Stakes. Dubai Duty Free will celebrate their 25th year of sponsorship at Newbury in 2020 and we are so grateful for their continued support. The £750,000 Al Shaqab Lockinge Day was attended by over 11,200 racegoers, a 5% increase on last year. A fantastic card and a wide open Lockinge, made for competitive viewing, with the Sir Michael Stoute-trained, Mustashry, landing the spoils and narrowly beating the wonderful mare Laurens. Betting turnover was up on the day and strong viewing figures of over 700,000 on ITV’s main channel was encouraging to see. We are once again grateful to Al Shaqab for their continued support of this race following a further five-year extension to their sponsorship announced at the end of July 2019.

Returning visits from Tom Jones, who performed at the Weatherby’s Super Sprint meeting in July, as well as Madness for our Hungerford meeting in August proved to be extremely popular with over 44,000 racegoers across the two events.

As we turned to the Jumps once more, we were lucky to watch the popular stayer, Paisley Park begin his 2019/20 campaign in the Ladbrokes Long Distance Hurdle followed up with De Rasher Counter winning the Ladbrokes Trophy in fine style for trainer, Emma Lavelle. We were pleased to report a 3% increase on the previous year’s attendance and this two-day meeting really does now signal the start of the Festive season for many. Positively, we also ended the year with increased attendances on Challow Hurdle Day which always has a family feel to it.

The Development

The re-modelling of the main parade ring and improvements to the areas behind the stands were completed during 2019 and we are delighted with the end result and the positive feedback from patrons. Works on the Annual Members’ facilities, including an upgrade of the Carnarvon Room in the Berkshire Stand and the creation of a new dedicated members facility in the Hampshire Stand were also completed. The restoration and refurbishment of the Royal Box end of the Berkshire Stand is now very nearly complete and will mark the end of our major redevelopment of the racecourse heartspace and facilities.

Our redevelopment has delivered a first class venue so we can continue to host racing of the highest quality, as well as having facilities which are well placed to meet the increasing demands of the modern day consumer, from horsemen and racegoers, to conference and hotel guests, nursery patrons and local residents. Our redevelopment will enable us to continue growing our

already well diversified business activities and maximise the returns from our investment.

The David Wilson Homes residential development continued through 2019 and is now into its final phase with approximately 1,000 of the total c.1,500 homes now built.

Trading since March 2020

Following the suspension of horse racing in Britain on 17th March, then followed quickly by the government’s ‘lockdown’ approach, the Company was forced to cease all of its trading activities encompassing our racing, hotel and conference events, whilst the children’s nursery was only able to remain open for a very small number of children of key workers. The consequence of these actions has had a material negative impact on our trading and financial performance since that date. 

Throughout the shutdown period the Newbury team continued to work closely with all relevant parties and were ready to resume racing Behind Closed Doors (“BCD”) on 11th June. To date we have now hosted 6 BCD racedays and have been pleased to see betting shops able to reopen allowing much needed Licenced Betting Office and media rights revenue to resume, albeit at a reduced level. For transparency, as has always been the case, these income streams will be separately identifiable within the financial statements.

The Rocking Horse Nursery reopened to a reduced number of children on 1st June and we are anticipating it being back up to ‘run-rate’ by the end of September following the Government’s announcement to remove class size limits from 20th July. However, our other two businesses, The Lodge Hotel and our Conference and Events business remain closed and based on the current demand projections we are not expecting either of these to be able to generate positive cashflows until 2021. Also, whilst our normal trading has been disrupted, we have reacted quickly to launch our ‘Pub in The Paddock’ outdoor hospitality venue and Car Park Party events to help us re-activate our business.

Financing and Liquidity

We have fully drawn down the revolving credit facility provided by National Westminster Bank plc as our cash reserves have been depleted during the period of minimal income against a cost base which is relatively fixed to support our year-round operation. Whilst it has not been necessary to extend these bank facilities, we have agreed with the bank to remove the existing covenants and replacing them with a single measure, based on minimum liquidity levels, tested through to April 2022, by which time we expect to receive £10.9m (being the final amount in relation to the residential development at the racecourse) from David Wilson Homes, a wholly owned subsidiary of Barratt Developments plc. We have also agreed to extend the date for the final repayment of the loan to Compton Beauchamp Estates Limited from November 2020 to April 2022 which coincides with the date when we expect the final payment from David Wilson Homes.

Outlook and Impact from Coronavirus

As a result of our financial position, it will be some time until we can return to offering the levels of prize-money to which the industry has become accustomed. In 2019 our executive contribution to prizemoney (adjusted for abandonment days) was £2.27m, which on a like for like, full year basis, represents a near doubling of our executive contribution in 6 years. We are proud of this growth in executive contribution and are committed to returning to providing substantial levels of prizemoney in the future, but there inevitably needs to be a correction in the short to medium term until the Company returns to profitability.

We are proud to be have played our part in helping the local West Berkshire community at this testing time, through our involvement supporting Age Concern with Meals on Wheels, preparing and delivering hot food for elderly people during the coronavirus crisis and also the NHS who we allowed to use, free of charge, our facilities as a local testing centre.

Whilst the situation remains uncertain, the Board has taken and continues to evaluate a number of possible actions to balance the short-term conservation of cash with the long-term needs of the business. The specific actions we have taken to date include;

           –                We have ceased all discretionary spending of both a revenue and capital nature.

           –                Some 2/3rds of our employees have been placed on furlough, being the Government’s Coronavirus Job Retention Scheme. Other staff, including the senior management team, have accepted a voluntary pay cut.

           –                All Non-Executive Director fees have been waived for 2020.

           –                A reorganisation and cost saving exercise has been undertaken leading to 19 staff (18% of the permanent workforce) being made redundant.

The Board is confident that the Company has the financial resources to trade through this period. However, the financial impact of the cessation in racing and the loss of racegoer attendance until October 2020 at the earliest remains substantial. Typically, in a normal year, admissions, catering and hospitality raceday revenues represents c50% of the Company’s turnover. These incomes have been severely curtailed. Understandably, this will result in the business reporting a substantial loss for 2020 compared with recent profits.

In conclusion, on behalf of the board, I would like to thank all the staff for their continued hard work, resolve and commitment to the business during these extraordinary challenging times.

Our sincere thanks, as ever, to all sponsors, owners, trainers, stable staff, members, racegoers and all customers for their ongoing support.
 

DOMINIC J BURKE
Chairman

31 July 2020

STRATEGIC REPORT

STRATEGY AND OBJECTIVES

The Board’s long-term strategy is for Newbury Racecourse to be a profitable, leading racecourse, entertainment and events business, with racing at its core. One of the key aims of this Strategic Report is to set out and appraise the business model through which we deliver that strategy.

Newbury Racecourse plc is the parent of a Group of companies which own Newbury Racecourse and engages in racing, hospitality and associated food and beverage retail activities. In addition, the Group operates a conference and events business, a children’s nursery, and an on-site hotel. Alongside its trading activities, the Group also owns freehold property from which it receives annual income and also benefits from the sale of residential properties on the site, as part of its long-term development agreement with David Wilson Homes.

2019 was a year which saw continued positive financial growth in a number of key areas of the business, despite the challenging backdrop of declining LBO revenues and the ongoing operational challenges of the redevelopment. We were delighted to be named, once again, as one of the top racecourses in the UK by VisitEngland and, for the fifth consecutive year, to be awarded the Racecourse Association and VisitEngland Excellence Accolade for customer service.

The accounts include a total of 29 days racing (2018: 29) comprising 11 days National Hunt racing (2018: 11) and 18 days flat racing (2018: 18). Two days racing were unfortunately abandoned as a result of the equine flu outbreak in February and waterlogging in October (2018: 2 meetings abandoned).

Overall raceday attendances in 2019 increased by 3% to 178,000 (2018: 173,000), with over 44,000 enjoying Tom Jones in July and Madness in August for the Party in the Paddock music events.

May marked the fifth year of Al Shaqab’s sponsorship of Lockinge Day, Newbury’s richest race meeting, which was attended by more than 11,000 racegoers, being a 5% increase on 2018’s attendance. This meeting continues to be the flagship event in our flat racing calendar, with Al Shaqab confirming their continued support of this race following a further five?year extension to their sponsorship announced at the end of July 2019.

Our longstanding association with the Dubai International Arabian Races Committee continued in 2019 and we were, once again, delighted to host its flagship UK race meeting at Newbury in July.

Our cornerstone jump meeting, The Ladbrokes Winter Carnival, at the beginning of December, marked the third year of our five year partnership with Ladbrokes. We and the sponsors were pleased to once again see strong attendances across the two day meeting of almost 24,000, being a 3% increase on 2018’s attendance.

We maintained our total prizemoney for 2019 at £5 million but, like many other racecourses, we will need to manage carefully our future prizemoney commitments, as a result of both the ongoing expected decline in LBO revenues and the impact of the COVID?19 situation. We are grateful for the ongoing support of all our sponsors, with particular thanks to Al Shaqab Racing, bet365, Betfair, Betway, Dubai Duty Free and Ladbrokes for their investment in 2019.

The Conference & Events sales team have continued to focus on proactive selling and relationship building within key sectors, including automotive, telecoms and location filming and we were pleased to host a number of large and prestigious events during 2019. We saw good levels of growth in both enquiries and conversion rates and the redeveloped facilities have been well received by clients.

Catering, Hospitality and Retail

Our in?house catering operation continues to underpin the delivery of food and beverage retail activities across all of our businesses. Over recent years we have invested time and resource into improving the catering offer to our customers and we have seen improved spends per head and feedback as a result. During 2019 we undertook a fundamental review of our catering procurement and have significantly rationalised our supplier chain as a result, which will deliver both improved margins and efficiencies.

The Rocking Horse Nursery

The nursery had another strong year in 2019 and is a key contributor to the overall profitability of the business. It is now operating at near optimal capacity and the focus has therefore been on improving margins, whilst maintaining the very highest levels of care and early years learning standards, through continued investment in the equipment, facilities and staff training.

The Lodge hotel operation has delivered good levels of growth over the last three years since opening to the general public and in 2019 we saw improvements in both average occupancy and average room rates. The Lodge continues to fulfil the important raceday requirement of providing accommodation to travelling stable staff, in addition to this it supports our conference, events and weddings business and has become a popular choice for many business travellers to the local area.

We were pleased to secure planning consent for the permanent change of use for The Lodge during 2019, securing the future trading prospects of the hotel and giving us the option to extend the facility from its current 36 bedrooms to 80 bedrooms at a future date, if viable.

The major development of the racecourse heartspace was largely completed in 2019, with the works on the Annual Members facilities including an upgrade of the Carnarvon Room in the Berkshire Stand and the creation of a new dedicated members facility in the Hampshire Stand both completed. The restoration and refurbishment of the Royal Box, including new racing integrity (camera) positions and enhanced public facilities on the ground floor, commenced in the autumn of 2019 and were expected to take approximately 6 months to complete at an estimated cost of £2.5m. Works have been slightly delayed, but are expected to now be completed during the summer of 2020 and remain within budget.

The David Wilson Homes (DWH) residential development continued to progress during 2019 with the Central Area apartments now fully completed and 100% sold and construction has continued in the Eastern Area. Approximately 1,000 homes out of the total c.1,500 are now built. Cash receipts from DWH from the sale of properties in 2019 were £1.09m. The final date for the balance of the guaranteed minimum land value to be paid by DWH is April 2022 and as at 31 December 2019 the balance outstanding was £11.0m.

Consolidated Group profit before tax in the year ended 31 December 2019 was £0.49m (2018: £1.48m) which includes £0.42m of exceptional losses (2018: £0.92m exceptional profits).

Total turnover in 2019 increased by 3% (£0.55m) to £19.84m (2018: £19.29m). Overall racing revenues, excluding the impact of capital credits claimed, grew by 2% (£0.25m). Despite two abandonments in the year (2018: 2 abandonments) like for like growth in racing revenues was £0.27m (2%). Overall media and betting rights revenues decreased by c. £0.13m (3%), to £4.46m for the twelve months to 31 December 2019, as the anticipated impact of the government FOBT reform and subsequent reduction in Licenced Betting Offices (LBO) revenues started to take effect towards the end of 2019 and is expected to continue to decline into 2020, as previously reported. Conference and Events revenues increased by 25% (£0.26m) versus 2018, to £1.32m, primarily as a result of a 44% increase in average spend per event.

Our catering, hospitality and retail business saw overall year on year growth in revenues of 4%, £0.19m. Raceday catering revenues were 7% up on 2018 on a like for like basis, with conference catering revenues up 14% as a result of the improved Conference & Events business in the year. Rocking Horse Nursery turnover increased by 3% to £1.47m with gross operating profits of £0.50m, an improvement of 2% on 2018. Turnover for The Lodge, our on-site hotel, increased by 21% year on year to £0.86m, driven by an average occupancy increase of 10% and an improvement in average room rate of 3% across the year. Gross operating profits for The Lodge operation were £0.17m (2018: £0.10m).

Total costs increased by 4% to £19.20m (2018: £18.45m). Administration expenses were broadly in line with 2018 at £2.98m, however overall Gross Profit margin was approximately 2% worse than 2018, largely as a result of higher music artist costs, increased business rates, utility costs and grounds maintenance.

The fair value gain in the Profit & Loss of £0.39M is in respect of investment property (commercial land) owned by the Group, which was revalued during the year to reflect benchmarked local market commercial land values.

Exceptional losses during 2019 were £0.42m (2018: £0.92m exceptional profits) being the movement in the fair value of the DWH debtor.

Overall operating profit before interest was £0.60m (2018: £1.76m). The tax credit of £0.15m (2018: credit £0.31m) relates to the movement in deferred tax during the period. Profit after tax was £0.63m (2018: £1.79m).

The decrease in cash reserves of £0.95m in the period (2018: £2.89m decrease) includes £2.80m of cash generated from operating activities, £1.09m of cash receipts from DWH in respect of properties sold in the period and is net of £2.86m of capital expenditure, together with £2.47m of scheduled loan repayments.

KEY PERFORMANCE INDICATORS

The Group uses raceday attendance, trading operating profit and cash generated from operating activities, as the primary performance indicators. Total attendance was 178,000 (2018: 173,000). Operating profit is shown within the profit and loss account on page 17 and cash generated from trading activities is shown within the consolidated statement of cashflows on page 24.

PRINCIPAL RISKS AND UNCERTAINTIES

 
Impact of COVID?19

The current global pandemic and the necessary restrictions this has placed upon business activities and public movement, creates huge uncertainties for trading in 2020. The Company’s response to this risk is covered below as well as in the Chairman’s Statement and the Going Concern Basis of Preparation.
 

Cashflow Risk
The main cash flow risks, under normal trading circumstances, are the vulnerability of race meetings to abandonment due to adverse weather conditions and fluctuating attendances particularly for the Party in the Paddock events, together with the possibility of delayed property receipts from David Wilson Homes. The practice of covering the racetrack to protect it from frost and investment in improved drainage, as well as insuring key racedays, largely mitigates the raceday risk. Regular review of variable conferencing costs reduces the impact of a decline in conference sales. The timing and amount of receipts from David Wilson Homes is dependent upon the rate of sales of residential plots. The risk of delayed receipts is mitigated to some extent by the long stop dates in the sale agreement, in respect of the minimum guaranteed land value. Short term cash flow risk is mitigated by regular review of the expected timing of receipts and by ensuring that the Group has committed facilities in place in order to manage its working capital and investment requirements.

Credit Risk
The Group’s principal financial assets are trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables. The amounts in the balance sheet are net of allowances for doubtful receivables. Payment is required in advance for ticket, hospitality, sponsorship, and conference and event sales, reducing the risk of bad debt. The David Wilson Homes debtor is backed by a parent company guarantee from Barratt Developments plc.

Liquidity Risk
In order to maintain liquidity to ensure that sufficient funds are available for both ongoing operations and the property redevelopment, the Group uses a mixture of term debt and revolving credit facilities which are secured on the property assets of the Group. The Board regularly review the facilities available to the Group to ensure that there is sufficient working capital available.

Price Risk
The Group operates within the leisure sector and regularly benchmarks its prices to ensure that it remains competitive, as well as having a dynamic pricing model in place.
 

Cost Risk
The Group has had a historically stable cost base. The key risks are unforeseen maintenance liabilities, movement in utility costs and additional regulatory costs for the racing business. A programme of regular maintenance is in place to manage the risk of failure in the infrastructure, while utility contracts are professionally managed. The Group is a member of the Racecourse Association, a trade association which actively seeks to manage increases in regulatory risk.

Interest Rate Risk
The Group manages its exposure to interest rates through an appropriate mixture of interest rate caps and swaps, where necessary.

The Board has undertaken a full and thorough review of the Group’s cash flow forecasts and associated risks and sensitivities, over the next twelve months and through to the David Wilson Homes longstop receipt date in April 2022. The extent of this review reflects the current economic climate, particularly COVID-19, as well as specific financial circumstances of the Group.

Base Case Scenario

The Board reviews the cash flow and working capital requirements in detail on a frequent basis, whilst under the current COVID-19 circumstances the regularity of this scrutiny has increased. Key trading assumptions made within the cash flow projections base case scenario include:

•            Racing taking place behind closed doors for the remainder of the 2020 flat season with capped attendance for the National Hunt racing season through to Spring 2021. Further capping is anticipated, but at a higher level, for the 2021 flat season, whilst we expect racing and crowds to return to their normal levels during Summer 2021. Newbury has already held three race days in June and will hold an additional three in July and two in August this year, all behind closed doors.

•            The three planned 2020 Party in the Paddock concerts will not take place and one during 2021 is expected to be lost.

•            Licenced Betting Offices have already re-opened on 15th June but will provide lower revenue streams than planned for the remainder of this year and into 2021.

•            The Hotel and Conference & Events businesses will not generate any further revenue during 2020 and both areas will expect to trade at break-even in 2021.

•            Following its provision for key workers only, the Nursery was able to re-open on 1st June at a lower capacity. However, the business has been able to charge a proportion of fees to allow others to retain their places. Within our scenario, full operation will return from 1st September 2020, on a phased basis, with full levels of profitability returning from the start of 2021.

Alongside these trading businesses the following additional actions have been taken:

•            Since the March lockdown, overheads have been reduced to the minimum required to keep the respective sites functioning whilst all facilities, except the Nursery, remained closed.

•            Newbury has taken advantage of the Government’s Coronavirus Job Retention Scheme and furloughed two thirds of permanent salaried employees from late March as well as obtaining business rate relief through to March 2021.

•            Many of those staff who have been retained to work agreed to accept voluntary pay cuts through to the end of September 2020.

•            A restructuring of the organisation was implemented during July which will reduce the on-going overhead costs substantially and allow the business to flex the workforce as, and when, the trading position improves.

•            Agreement has been confirmed with NatWest Bank on the waiving of existing financial covenants relating to the fully drawn £6m credit facility, and instead replacing them with a single minimum liquidity level covenant of £600,000. 

•            The final loan payment due to Compton Beauchamp Estates in November 2020 has been deferred until April 2022. The final minimum land payment of £10.9m due from David Wilson Homes (and guaranteed by Barratt Developments plc) is expected to be received by April 2022.

•            Progression of the disposal of previously targeted non-core assets has continued.

•            2020 Capex has been restricted to only that already committed plus a contingency allowance. 2021 Capex reduced to £250,000 (currently uncommitted). All non-essential expenditure has been ceased.

Severe but plausible downside Scenario

The impact of COVID-19 is constantly being assessed and the situation (along with Government support) is subject to continual change. This makes it very difficult to assess with any certainty how the situation will evolve. However, the easing of the Government’s lockdown has meant that the racing and hospitality businesses as well as our nursery operations have been able to plan accordingly. Whilst the board is confident that the assumptions used in the base case are reasonable, mitigating plans have been developed should there be any substantially adverse change to the anticipated liquidity over the period.

This severe but plausible downside scenario considers the potential of a ‘second spike’ of COVID-19. Under this scenario racing will remain behind closed doors for the remainder of 2020, with no crowds possible until the start of next year. If LBO’s are required to close under specific circumstances, such as regionally, then we have modelled that this income reduces to c60% of current forecasts through to the end of 2020. We have also considered that the nursery will revert back to supporting key workers only for a period of 3 months. In addition to this, the sale of the previously identified non-core asset has also been removed from the downside scenario.

In the unlikely scenario that these events do all occur, additional mitigation plans have been put in place and will be implemented, if required, in order to ensure that sufficient headroom for liquidity and covenant can continue to be achieved.

These include:

•            A further substantial reduction to 2020 and 2021 Capex to exclude all but committed Capex.

•            Bonuses & LTIP payments being deferred until the cash position is deemed sufficient.

•            Further salary and management structure contingencies being executed including the extension of voluntary wage reductions by the senior management team throughout 2021.

•            A reduction to prize money and food & beverage facilities provided on race days (once resumption takes effect).

Other mitigation measures are possible but have not been included in the severe but plausible downside scenario. The Company has the ability to draw on funding options provided by the racing industry and would accelerate the evaluation of a number of material non-core assets for potential disposal. If a second spike does occur, then it is assumed that the Government will extend financial support to businesses. 

The Group has committed credit facilities, which are in place as an effective bridging facility through to April 2022, and the Board has concluded that it has a reasonable expectation that the Group and parent company has adequate resources, banking facilities and arrangements in place to continue in operational existence for the foreseeable future and therefore the going concern basis has been adopted in preparing the financial statements.

Nonetheless, as at the date of this report, the possible impact of COVID-19 provides a level of uncertainty as the situation for the racing industry and our other businesses continually changes. The Board continues to monitor this routinely and to develop detailed forecasts in response to the changing environment and through reviews of mitigation and contingency plans.

CORPORATE AND SOCIAL RESPONSIBILITY

Employee Consultation
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group and the Company. This is achieved through formal and informal meetings, and distribution of the annual financial statements. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.

Policy on Payments to Suppliers
Although no specific code is followed, it is the Group’s and Company’s policy, unless otherwise agreed with suppliers, to pay suppliers within 30 days of the receipt of an invoice, subject to satisfactory performance by the supplier. The amount owed to trade creditors at 31 December 2019 is 4% (2018: 3%) of the amounts invoiced by suppliers during the year. This percentage, expressed as a proportion of the number of days in the year, is 16 days (2018: 10 days).

Disabled Employees
Applications for employment by disabled persons are always fully considered, bearing in mind the abilities of the applicant concerned.  In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and the appropriate training is arranged. It is the policy of the Group and the Company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Charitable Donations
During the year the Group made charitable contributions totalling £5,905 to national charities (2018: £3,560).

This report was approved by the board and signed on its behalf by:

J M Thick
Chief Executive

31 July 2020

   

Sponsors in the year to 31 December 2019

We would like to thank our leading sponsors for their significant support in 2019;

Al Shaqab

Betfair

British European Breeders Fund

Dubai Duty Free

Molson Coors

Ladbrokes

Marsh JLT Specialty Ltd

             
We also received much appreciated support from the following sponsors;

137 Gin Distillery                                                                      Irish Thoroughbred Marketing

Agetur                                                                                         Irwin Mitchell Private Wealth

Archie Watson Racing                                                             Kennet Shopping

Awdry Bailey and Douglas                                                     KKA Architecture

Be Wiser Insurance                                                                  Mansion Bet

Bet Victor                                                                                   Matthew Fedrick Farriers

bet365                                                                                        Melbourne 10

Betway                                                                                       Mencap West Berkshire

BJP Insurance                                                                            Mildmay Farm

Bloor Homes                                                                             Mirage Signs

Bridget Drew                                                                             Newbury BID

British Horse Society                                                               Newbury Weekly News

Byerley Stud                                                                              Oakgrove Stud

Calder and Grandidge                                                              Oakley Coach Builders

Christopher Smith Associates                                               Pertemps Network

Churchill Retirement Living                                                   Pimms

Coln Valley Stud                                                                        Powersolve Electronics

Comax                                                                                        Premier Food Courts

Compton Beauchamp                                                             Prodec Networks Ltd

Conundrum Consulting                                                           Pump Technology

CoverMarque                                                                            Raynor Bosch

Crossland Employment Solicitors                                         Regus

CSP                                                                                              Relyon Cleaning

Denford Stud                                                                             Ross Brooke Chartered Accountants

Dreweatts                                                                                  Rossdales Veterinary Surgeons

Enotria & Coe                                                                           Sir Peter O’Sullevan Trust

Equine Productions                                                                  SIS

European Breeders Fund                                                        South Downs Water

Event Bar Management                                                          Spinal Injuries Association

Freixenet Copestick Ltd                                                          Starlight Children’s Charity

Frontier                                                                                       The Energy Check

Goffs UK                                                                                     The Mortgage Branch

Greatwood Charity                                                                  Thatcham Butchers

Grundon Waste Management                                               Thoroughbred Breeders Association

Haynes Hanson and Clark                                                      TT Tents

Heatherwold Stud                                                                    Unibet

Horatio’s Garden                                                                       Watership Down Stud

Horris Hill School                                                                      Weatherbys Bank

Hot to Trot Racing                                                                    West Berkshire Brewery

               InDzine                                                                                        West Berkshire Racing Club

                                                                                                     William Hill

There were also 9 races sponsored for birthdays, retirement or in memoriam. 

CONSOLIDATED PROFIT AND LOSS ACCOUNT

YEAR ENDED 31 DECEMBER 2019

2019 2018
Note £000 £000
Turnover  4                   19,841                   19,295
Cost of sales                (16,220)                (15,478)
Gross profit                               
                    3,621
                       
                    3,817
Administrative expenses                  (2,983)                  (2,974)
Gain on revaluations  15                        388                         –    
Net exceptional items  5                     (422)                        915
Operating profit  6                               
                       604
                       
                    1,758
Interest receivable  8                             7                           12
Interest payable  9                     (126)                      (287)
Profit before tax                               
                       485
                       
                    1,483
Tax on profit  10                        145                        309
Profit for the financial year                               
                       630
                       
                    1,792
Owners of the parent                        630                     1,792

   

Profit per share (basic and diluted) (Note 12)                                                                                                                                                                                 18.8p          53.5p

All amounts derive from continuing operations
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2019

2019 2018
Note £000 £000

Profit for the financial year

                       630
                              
                    1,792
                              
Other comprehensive income

Remeasurement of the net defined benefit schemes

                    (407)                        418
Deferred tax on actuarial (loss)/gain current year charge                           69                        (71)
Deferred tax prior year adjustment                             4                         –    
Other comprehensive (loss)/income for the year                               
                    (334)
                              
                       347
Total comprehensive income for the year                               
                       296
                              
                    2,139

   

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2019

2019 2018
Note £000 £000
Fixed assets
Tangible assets  13                   40,218                   38,490
Investments  14                        117                        117
Investment property  15                     1,500                     1,112
                              
                  41,835
                       
                  39,719
Current assets
Stocks  16                        272                        250
Debtors: amounts falling due after more than one year  17                   13,384                   13,403
Debtors: amounts falling due within one year  17                     4,655                     6,676
Cash at bank and in hand                     1,269                     2,223
                              
                  19,580
                       
                  22,552
Creditors: amounts falling due within one year  18                  (5,884)                  (5,110)
Net current assets                                                  13,696                                           17,442
Total assets less current liabilities                               
                  55,531
                       
                  57,161
Creditors: amounts falling due after more than one year  19                         –                      (2,471)
Provisions for liabilities
Provisions  21                  (3,561)                  (3,270)
Pension liability  24                  (1,019)                      (747)
Net assets                               
                  50,951
                       
                  50,673
Capital and reserves
Called up share capital  23                        335                        335
Share premium                   10,202                   10,202
Revaluation reserve  23                           75                           75
Capital redemption reserve  23                        143                        143
Profit and loss account                   40,126                   39,830
Shareholders’ funds                               
                  50,881
                       
                  50,585
Capital grants
Deferred capital grants  25                           70                           88
                              
                  50,951
                       
                  50,673

The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf by:       

D J Burke J M Thick
Chairman Director

   

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2019

Called up share capital Share premium account Capital redemption reserve Revaluation reserve Profit and loss account Total equity
£000 £000 £000 £000 £000 £000
At 1 January 2019                       335                 10,202                       143                         75                 39,830                 50,585
Profit for the year                        –                            –                            –                            –                           630                       630
Other comprehensive loss                        –                            –                            –                            –                        (334)                    (334)

At 31 December 2019

                            
                      335
                            
                10,202
                            
                      143
                            
                        75
                            
                40,126
                            
                50,881

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2018

Called up share capital Share premium account Capital redemption reserve Revaluation reserve Profit and loss account Total equity
£000 £000 £000 £000 £000 £000
At 1 January 2018                       335                 10,202                       143                         75                 37,691                 48,446
Profit for the year                        –                            –                            –                            –                       1,792                   1,792
Other comprehensive income                        –                            –                            –                            –                           347                       347

At 31 December 2018

                            
                      335
                            
                10,202
                            
                      143
                            
                        75
                            
                39,830
                            
                50,585

   

CONSOLIDATED CASH FLOW STATEMENT

YEAR ENDED 31 DECEMBER 2019

2019 2018
£000 £000
Cash flows from operating activities
Profit for the financial year                        630                     1,792
Adjustments for:
Exceptional items                        422                      (915)
Amortisation of capital grants                        (18)                        (18)
Depreciation charges                     1,056                        905
Interest paid                        126                        287
Interest received                          (7)                        (12)
Tax credit                     (145)                      (309)
(Increase) in stocks                        (22)                        (47)
Decrease in debtors                     1,001                     2,374
Increase/(decrease) in creditors                        291                      (440)
Net fair value (gains)/losses recognised in P&L                     (388)                         –    
Corporation tax paid                         –                            (78)
Other associated property receipts                           12                           40
Pension top up payments                     (163)                         –    
Net cash generated from operating activities                               
                    2,795
                              
                       
                    3,579
                              
Cash flows from investing activities
Receipts from David Wilson Homes                     1,086                     3,252
Purchase of fixed assets                  (2,855)                  (6,011)
Sale of tangible fixed assets                             1                         –    
Other associated property costs                         –                          (647)
Interest received                             7                           12
Net cash from investing activities                               
                 (1,761)
                              
                       
                 (3,394)
                              
Cash flows from financing activities
Receipt of new bank loan                        500                         –    
Repayment of CBEL loan                  (2,472)                  (3,000)
British Championship loan repayment                             9                           11
Loan finance issued                         –                            (69)
Interest paid                        (25)                        (11)
Net cash used in financing activities                               
                 (1,988)
                       
                 (3,069)
Net (decrease) in cash and cash equivalents                               
                    (954)
                       
                 (2,884)
Cash and cash equivalents at beginning of year                     2,223                     5,107
Cash and cash equivalents at the end of year                               
                    1,269
                       
                    2,223
Cash and cash equivalents at the end of year comprise:
Cash at bank and in hand                     1,269                     2,223

   

                              
                    1,269
                       
                    2,223

   

1. NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2019

General information

Newbury Racecourse plc (the “Company”) is a public company incorporated, domiciled and registered in England in the UK. The registered number is 00080774 and the registered address is The Racecourse, Newbury, Berkshire, RG14 7NZ.

2.           Accounting policies

2.1 Basis of preparation of financial statements

The Group and company financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Profit and Loss Account in these financial statements.

The parent company is included in the consolidated financial statements and is considered to be a qualifying entity under FRS 102 paragraphs 1.8 to 1.12. The following exemptions available under FRS 102 in respect of certain disclosures for the parent company financial statements have been applied:

• The reconciliation of the number of shares outstanding from the beginning to the end of the period has not been included a second time; and
• No separate parent company Cash Flow Statement with related notes is included

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 3.

2.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries Newbury Racecourse Enterprises Limited and Newbury Racecourse Management Limited.

The Board has undertaken a full and thorough review of the Group’s cash flow forecasts and associated risks and sensitivities, over the next twelve months and through to the David Wilson Homes longstop receipt date in April 2022. The extent of this review reflects the current economic climate, particularly COVID-19, as well as specific financial circumstances of the Group.

Base Case Scenario

The Board reviews the cash flow and working capital requirements in detail on a frequent basis, whilst under the current COVID-19 circumstances the regularity of this scrutiny has increased. Key trading assumptions made within the cash flow projections base case scenario include:

•       Racing taking place behind closed doors for the remainder of the 2020 flat season with capped attendance for the National Hunt racing season through to Spring 2021. Further capping is anticipated, but at a higher level, for the 2021 flat season, whilst we expect racing and crowds to return to their normal levels during the Summer. Newbury has already held three race days in June and will hold an additional three in July and two in August this year, all behind closed doors.

•       The three planned 2020 Party in the Paddock concerts will not take place and one during 2021 is expected to be lost.

•       Licenced Betting Offices have already re-opened on 15th June but will provide lower revenue streams than planned for the remainder of this year and into 2021.

•       The Hotel and Conference & Events businesses will not generate any further revenue during 2020 and both areas will expect to trade at break-even in 2021.

•       Following its provision for key workers only, the Nursery was able to re-open on 1st June at a lower capacity. However, the business has been able to charge a proportion of fees to allow others to retain their places. Within our scenario, full operation will return from 1st September 2020, on a phased basis, with full levels of profitability returning from the start of 2021.  

Alongside these trading businesses the following additional actions have been taken:

•       Since the March lockdown, overheads have been reduced to the minimum required to keep the respective sites functioning whilst all facilities, except the Nursery, remained closed.

•       Newbury has taken advantage of the Government’s Coronavirus Job Retention Scheme and furloughed two thirds of permanent salaried employees from late March as well as obtaining business rate relief through to March 2021.

•       Many of those staff who have been retained to work agreed to accept voluntary pay cuts through to the end of September 2020.

•       A restructuring of the organisation was implemented during July which will reduce the on-going overhead costs substantially and allow the business to flex the workforce as, and when, the trading position improves.

•       Agreement has been confirmed with NatWest Bank on the waiving of existing financial covenants relating to the fully drawn £6m credit facility, and instead replacing them with a single minimum liquidity level covenant of £600,000. 

•       The final loan payment due to Compton Beauchamp Estates in November 2020 has been deferred until April 2022. The final minimum land payment of £10.9m due from David Wilson Homes (and guaranteed by Barratt Developments plc) is expected to be received by April 2022.

•         Progression of the disposal of previously targeted non-core assets has continued.

•       2020 Capex has been restricted to only that already committed plus a contingency allowance. 2021 Capex reduced to £250,000 (currently uncommitted). All non-essential expenditure has been ceased.

Severe but plausible downside Scenario

The impact of COVID-19 is constantly being assessed and the situation (along with Government support) is subject to continual change. This makes it very difficult to assess with any certainty how the situation will evolve. However, the easing of the Government’s lockdown has meant that the racing and hospitality businesses as well as our nursery operations have been able to plan accordingly. Whilst the board is confident that the assumptions used in the base case are reasonable, mitigating plans have been developed should there be any substantially adverse change to the anticipated liquidity over the period.

This severe but plausible downside scenario considers the potential of a ‘second spike’ of COVID-19. Under this scenario racing would remain behind closed doors for the remainder of 2020, with no crowds possible until the start of next year. If LBO’s are required to close under specific circumstances, such as regionally, then we have modelled that this income reduces to c60% of current forecasts through to the end of 2020. We have also considered that the nursery will revert back to supporting key workers only for a period of 3 months. In addition to this, the sale of the previously identified non-core asset has also been removed from the downside scenario.

In the unlikely scenario that these events do all occur, additional mitigation plans have been put in place and will be implemented, if required, in order to ensure that sufficient headroom for liquidity and covenant can continue to be achieved.

These include:

•         A further substantial reduction to 2020 and 2021 Capex to exclude all but committed Capex.

•         Bonuses & LTIP payments being deferred until the cash position is deemed sufficient.

•       Further salary and management structure contingencies being executed including the extension of voluntary wage reductions by the senior management team throughout 2021.

•       A reduction to prize money and food & beverage facilities provided on race days (once resumption takes effect).

Other mitigation measures are possible but have not been included in the severe but plausible downside scenario. 

The Company has the ability to draw on funding options provided by the racing industry and would accelerate the evaluation of a number of material non-core assets for potential disposal.  If a second spike does occur, then it is assumed that the Government will extend financial support to businesses. 

The Group has committed credit facilities, which are in place as an effective bridging facility through to April 2022, and the Board has concluded that it has a reasonable expectation that the Group and parent company has adequate resources, banking facilities and arrangements in place to continue in operational existence for the foreseeable future and therefore the going concern basis has been adopted in preparing the financial statements.

Nonetheless, as at the date of this report, the possible impact of COVID-19 provides a level of uncertainty as the situation for the racing industry and our other businesses continually changes. The Board continues to monitor this

routinely and to develop detailed forecasts in response to the changing environment and through reviews of mitigation and contingency plans.

Services rendered, raceday income including admissions, catering revenues, sponsorship and licence fee income is recognised on the relevant raceday. Annual membership income and box rental is recognised over the period to which they relate.

Other income streams are also recognised over the period to which they relate, for example, ground rents received from residents, conference income is recognised on the day of the conference, the Lodge hotel income is recognised over the duration of the guests stay and nursery income is recognised as the child attends the nursery.

Sale of goods, revenue is recognised for the sale of food and liquor when the transaction occurs.

Property receipts

Property receipts are recognised in accordance with the substance of the transaction being that of an exceptional sale of land. The minimum guaranteed sum, as set out in the agreement with David Wilson Homes, is recognised at the point of sale. In accordance with FRS102, at each reporting date, the sum receivable is re?estimated based upon currently projected land value with the difference between this value and the discounted net present value recorded in the profit and loss account.

Investment in properties are freehold interests which are held to earn rental income. Investment properties are recognised at fair value. Fair value is determined based upon benchmarked, local commercial land values and supported by the opinion of an independent expert valuer. Any gains or losses on revaluation are recognised in the profit & loss account.

Investments in subsidiaries are measured at cost less accumulated impairment. Investments in unlisted Group shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Gains and losses on remeasurement are recognised in the Consolidated Profit and Loss Account for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment.

Dividends and other investment income receivable are included in the Profit and Loss Account inclusive of withholding tax but exclusive of other taxes.

2.8 Lease assets receivable

Lease assets receivable relates to freeholds that the Group has acquired, or has the option to acquire, from David Wilson Homes. The freeholds concerned relate to residential apartment buildings constructed as part of the overall residential development. Individual apartments in the development were sold by David Wilson Homes to purchasers under long?term leases, typically of 125 years. Under the terms of their long?term leases, lessors are required to pay ‘ground rent’ to the freehold owner for the duration of their lease.

As the majority of the risks and rewards, for much of the life of the property, lie with the lessor, the Group does not recognise a fixed asset in relation to the freehold. Since the Group’s principal interest in the freehold is limited to the expected future cashflows arising from the ground rent, the Group’s cost of investment represents the cost to acquire the future ground rent cashflows. 

These are initially recognised at fair value which is calculated based on the net present value of future cashflows arising from the ground rents receivable over the lease term. This also represents the market value of the freehold agreed with David Wilson Homes. These amounts are included in the balance sheet as debtors less than and greater than one year. Ground rent receipts relating to the period, are applied against the net receivable balance. The leases receivables are monitored for indications of impairment by comparing the net present value of future rentals receivable to the carrying value of the lease receivable. Where there is a shortfall in the present value of the future rentals receivable, an impairment of the carrying value of the lease receivable is recognised.

2.9 Tangible fixed assets

Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. 

Land is not depreciated. Depreciation on other assets is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight?line method.

Depreciation is provided on the following basis:

Freehold buildings and outdoor fixtures 2% ? 5% straight line
Tractors and motor vehicles 5% ? 10% straight line
Fixtures, fittings and equipment 2% ? 25% straight line

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date (see note 3).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Consolidated Profit and Loss Account.

2.10 Impairment of assets

Financial assets (including trade and other debtors)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. For financial instruments measured at cost less impairment an impairment is calculated as the difference between its carrying amount and the best estimate of the amount that the Company would receive for the asset if it were to be sold at the reporting date. Interest on the impaired asset continues to be recognised through the unwinding of the discount. Impairment losses are recognised in profit or loss. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Non?financial assets
The carrying amounts of the entity’s non?financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash?generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre?tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash?generating unit”).

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Stocks are valued at the lower of cost and net realisable value. Provision is made for obsolete, slow moving or defective items where appropriate.

2.12 Repairs and renewals

Expenditure on repairs and renewals and costs of temporary facilities during construction works are written off against profits in the year in which they are incurred.

2.13 Non recognised financial information

The profit and loss account includes measures which are not accounting measures under UK GAAP which are used to assess the financial performance of the business. These measures which are termed ‘non?GAAP’ include reference to EBITDA within the Strategic Report.

2.14 Cash and cash investments

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.

Cash which is held on deposits that are not accessible with less than 24 hours’ notice, is deemed to not be liquid and is therefore classified as cash investments on the balance sheet.

2.15 Provisions for liabilities

Provisions are made where an event has taken place that gives the Group a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the Consolidated Profit and Loss Account in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet.

Where dividends are declared, appropriately authorised (and hence no longer at the discretion of the Group) after the balance sheet date but before the relevant financial statements are authorised for issue, dividends are not recognised as a liability at the balance sheet date because they do not meet the criteria of a present obligation in FRS102.

2.17 Current and deferred taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in the Consolidated Profit and Loss Account, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company and the Group operate and generate income.

Deferred tax is provided on timing differences which arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. The following timing differences are not provided for: differences between accumulated depreciation and tax allowances for the cost of a fixed asset if and when all conditions for retaining the tax allowances have been met; and differences relating to investments in subsidiaries, to the extent that it is not probable that they will reverse in the foreseeable future and the reporting entity is able to control the reversal of the timing difference.  Deferred tax is not recognised on permanent differences arising because certain types of income or expense are non?taxable or are disallowable for tax or because certain tax charges or allowances are greater or smaller than the corresponding income or expense.

Deferred tax is provided in respect of the additional tax that will be paid or avoided on differences between the amount at which an asset (other than goodwill) or liability is recognised in a business combination and the corresponding amount that can be deducted or assessed for tax.  Goodwill is adjusted by the amount of such deferred tax.

Deferred tax is measured at the tax rate that is expected to apply to the reversal of the related difference, using tax rates enacted or substantively enacted at the balance sheet date. For non?depreciable assets that are measured using the revaluation model, or investment property that is measured at fair value, deferred tax is provided at the rates and allowances applicable to the sale of the asset/property. Deferred tax balances are not discounted.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that is it probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Capital grants
Capital grants received, apart from HBLB grants, are accounted for as deferred grants on the Balance Sheet and credited to the Profit and Loss Account over the estimated economic lives of the asset to which they relate. Capital grants are in deferred capital grants on the Balance Sheet as the associated works have been performed and it is not in any way repayable.

Horserace Betting Levy Board (HBLB) grants
The HBLB provides funding to racecourses which is used to support racing activities. HBLB grants are accounted for under the performance model in line with standard industry practice. HBLB grants are credited to the Profit and Loss Account as revenue in the month of the raceday, the corresponding debtor is carried on the Balance Sheet until the cash is received. 

Defined contribution plans and other long-term employee benefits
A defined contribution plan is a post?employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in the periods during which services are rendered by employees.

Defined benefit plans
A defined benefit plan is a post?employment benefit plan other than a defined contribution plan. The entity’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.  The entity determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate as determined at the beginning of the annual period to the net defined benefit liability (asset) taking account of changes arising as a result of contributions and benefit payments.

The discount rate is the yield at the balance sheet date on AA credit rated bonds denominated in the currency of, and having maturity dates approximating to the terms of the entity’s obligations.  A valuation is performed annually by a qualified actuary using the projected unit credit method.  The entity recognises net defined benefit plan assets to the extent that it is able to recover the surplus either through reduced contributions in the future or through refunds from the plan.

Changes in the net defined benefit liability arising from employee service rendered during the period, net interest on net defined benefit liability, and the cost of plan introductions, benefit changes, curtailments and settlements during the period are recognised in profit or loss.

Remeasurement of the net defined benefit liability/asset is recognised in other comprehensive income in the period in which it occurs.

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs.  Finance charges, including premiums payable on settlement or redemption and direct issue costs are accounted for on an accrual basis in the profit and loss account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period which they arise.

2.21 Financial instruments

Trade and other debtors / creditors
Trade and other debtors are recognised initially at transaction price plus attributable transaction costs. Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors.  If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument.

Interest?bearing borrowings classified as basic financial instruments
Interest?bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest?bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.

Fair value measurement
Assets and liabilities that are measured at fair value are classified by level of fair value hierarchy as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – inputs for the asset or liability that are not based on observable market data.

Directors exercise their judgement in classification of certain items as exceptional and outside the Group’s underlying results. The determination of whether items should be separately disclosed as an exceptional item or other adjustment requires judgement on its materiality, nature and incidence. Accounting transactions related to the DWH agreement are considered outside the ordinary course of business, see note 5 for further detail.

3. Judgments in applying accounting policies and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements;

Capitalisation of design fees and expenditure in connection with the ongoing development works, which during the year ended 31 December 2019 amounted to £0.2m (2018: £0.4m). The total carrying value of capitalised design fees at 31 December 2019 is £1.7m. In the directors’ view these costs are directly attributable to the development of a long term fixed asset which will provide future economic benefits in excess of its carrying value.

Estimation techniques
Significant estimation techniques include:

David Wilson Homes
The fair value of the long term David Wilson Homes debtor balance is determined with reference to current market conditions and to reflect the risks specific to the balance due. Estimates include the current value of the land as determined by the agreed parameters of the land sale agreement with David Wilson Homes, together with the application of a suitable discount rate.

Impairment of assets
Determining whether assets are impaired requires an estimation of the value in use of the cash generating units to which assets have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. The carrying amount of tangible fixed assets and investment property at the Balance Sheet date was £41.7 million. No impairment loss was recognised in 2019 as there was no further indication of impairment required (2018: no impairment loss).

 

4. EXCEPTIONAL ITEMS
2019 2018
£000 £000

Net book value of asset disposal

                         (3)                          (2)
Release of property provision                         –                         1,500
Pall Mall development costs                         –                          (596)
DWH debtor movement in fair value                     (419)                           13
                              
                    (422)
                              
                       915

   

In accordance with note 2, accounting transactions related to the DWH agreement are considered outside the ordinary course of business. The fair value loss recognised in 2019 includes an amount of £475k which relates to the prior year end.

The release of the property provision is in connection with the ongoing obligations related to the sale of land and redevelopment of the racecourse. The Pall Mall costs are professional fees connected to the aborted development project.

   

Basic and diluted profit per share is calculated by dividing the profit attributable to ordinary shareholders for the year ended 31 December 2019 of £630,000 (2018: £1,792,000) by the weighted average number of ordinary shares during the year of 3,348,326 (2018: 3,348,326).

NOTES

The financial information set out above does not constitute the company’s statutory accounts for the years ended 31 December 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the company’s annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

The information included in this announcement is taken from the audited financial statements which are expected to be dispatched to the members shortly and will be available at www.newburyracecourse.co.uk.

This announcement is based on the Company’s financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland and with those parts of the Companies Act 2006 that are applicable to companies reporting under UK GAAP.

Neither an audit nor a review provides assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular whether any changes may have occurred to the financial information since first published.  These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. 

Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

This preliminary statement was approved by the Board of Directors on 31 July 2020

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