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Wellington Market Company plc ("Wellington" or "the Company") Financial Statements for the year ended 31st December 2008 Chairman's Statement 2008 has been both a disappointing yet significant year for your company. Trading continued very much as indicated in my September Interim Statement with very difficult trading conditions being experienced as the recession developed and the inclement weather continued necessitating the cancellation of a number of our outdoor markets. Although we achieved an operating profit of £391,000 a net interest charge of £374,000 and an impairment charge of £442,000 turned this into an overall pre tax loss of £425,000. The reduction in our tangible assets on the balance sheet, by way of professional revaluations, reflects both our trading performance at Luton and the national reduction in investment property values. Given our financial results, the rise in gearing levels to 102% (total borrowings as a percentage of net assets) and our likely need to finance both expansion and sensible diversification we have reluctantly taken the decision to halve our total dividend for the year to 2p per ordinary share by declaring a final dividend of 0.5p following an interim dividend already paid of 1.5p. However I am pleased to report that our bank with which we have a longstanding relationship have renewed our borrowing facility. By far the most important event during the year was the appointment of our new Chief Executive, Malcolm Ball, who joined us in June. Malcolm has enjoyed a very successful business career and more latterly created and developed the London based Vinopolis Wine Tasting Experience into a very popular and profitable visitor attraction. Your Board is delighted with the energy and flair which Malcolm has brought to his new role and a number of his ideas and thoughts are shared with you in his Chief Executive's Report. While these will obviously take time to develop I would be disappointed if noticeable progress is not made in 2009. Shareholders will have an opportunity to meet and question Malcolm at our Annual General Meeting to be held on Friday 8th May 2009, this time in Luton to give attendees a tour of our market there, following last year's successful AGM visit to Morley. Finally I would like to thank all our Wellington team for their considerable dedication and effort during a very difficult 2008, particularly to our Development Director, Chris Barber, who stewarded the company as Acting Chief Executive during our interregnum. Lord Lee of Trafford Chairman 27 March 2009 Chief Executive's Report Introduction I have now been at Wellington Market Company for around nine months and during this time I have travelled many thousands of miles, visited every site, had meetings with our employees, traders and perhaps most importantly, many of our customers. I am impressed by what I have seen but, as with every business, there is considerable scope for improvement. It is a challenging time for markets. Ever since the mid 1970s, when traditional indoor and outdoor markets were at the heart of the retail sector in the UK, the development and expansion of out-of-town superstores and retail parks has had a severe impact on both markets and the town centres they serve. As recession bites, we have seen many consumers choose markets to find cost savings on their weekly shopping. Unfortunately, although many people's perception of market shopping is that the price of items on offer is low, they lack confidence in the goods themselves. It is with this in mind that we have introduced a `Returns Policy', which enables customers to have confidence in the products that they are buying and erodes any negative perceptions. 2008 Performance In the latter part of 2008, we have introduced a programme to rationalise poorly performing outdoor sites. This has seen the closure of eight markets, predominately in the South West of England, thus allowing us to focus on more profitable indoor markets, thus helping to negate the impact of inclement weather, and concentrate on a selection of well-performing outdoor sites for special events. The reduction in sites has made it possible for us to reduce the senior manager headcount and restructure our operations into a simpler North and South split. This has improved our efficiency and we have continued to seek out other cost saving measures - where appropriate. We have started monitoring the price differential between our markets and the leading supermarkets, which has confirmed our belief that shopping at markets offers better value to consumers. The message of the price difference has been placed at the heart of our marketing strategy and our advertising and public relations campaign has made excellent use of this. Moving Forward As an organisation with a newfound marketing focus, we have appointed a marketing team to implement our various initiatives. These include the development of a new Corporate Pack that demonstrates, to our corporate clients and partners, our commitment to the professional marketing and operation of our sites. This pack includes items such as testimonials, facts and figures, examples of our press cuttings, broadcast media coverage, advertising and marketing collateral. All this is helpful when looking to increase footfall and the reputation of the markets. This pack also differentiates us from our competitors and demonstrates to our landlords/partners - primarily local authorities - the added value of selecting us as a market operator. This has been evident in our winning of new business, such as Shrewsbury's Sunday Market and the retention of existing contracts, Worthing being a recent example. We have embraced the digital age and will shortly be launching a new Town and Country Markets website that introduces e-commerce opportunities such as online booking for traders, tickets for special events and our soft play area for children in Cornwall. This will be extended to provide an e-commerce platform for traders seeking to make the move into online sales to consumers. By creating the post of marketing manager, we have also been able to remove the burden of delivering local marketing activities from our individual site managers - allowing them to focus on the profitable day-to-day operation of their sites. Our recruitment policy for site managers has become more rigorous and will focus on candidates with good retail experience. Subject to a thorough scrutiny of factors such as location, potential footfall and consumer appetite for markets, acquisitions will continue to play a major role in our planned growth strategy. Meanwhile, although prior to my appointment organic growth at our existing sites had, to some extent, been in a holding pattern, with the introduction of some of these new initiatives, we are taking a more proactive approach to securing new business. We also need to see new blood enter the industry, as this brings fresh ideas, new products and draws in new customers. We are actively pursuing strategies to drive an increase in new traders starting up at our sites, which include working with a number of Government agencies, trade bodies and high profile charities. In addition to the core business, we will continue to develop our plans for diversification, which are based on two levels. Firstly; facilities and services that can easily be bolted onto our existing sites to add value and draw in both new customers and revenue for all our businesses and, secondly; we will seek to diversify into new areas that complement our existing operations, or match our skills and resources. As the first part of this diversification plan, we are renovating the successful children's soft play area founded at our Cornish Market World site. We have rebranded this as a more contemporary `Kidzworld', and over the next 12 to 18 months we will consider introducing this concept to a number of our indoor sites, both because it should deliver incremental profit in its own right and also will give parents even more reason to visit our markets. Another example of this diversification is the possible introduction of a secure environment from which to offer a nursery, pre-school activities and a variety of kids' clubs serving the local community and visitors on holiday. Markets in the United Kingdom are faced with a distinct choice. If they remain the same, they will stagnate as a relic from the past. By grasping opportunities such as those I have referred to above, our chosen business will move forward into the 21st Century were it should flourish. Our chosen path is clear and I am positive that our vision for the future will provide a route to the prosperous expansion of our business. Malcolm Ball Chief Executive 27 March 2009 Consolidated Profit and Loss Account at 31 December 2008 2008 2007 £'000 £'000 Turnover - continuing operations 6,914 7,266 Cost of sales (5,711) (5,745) --------- --------- Gross profit 1,203 1,521 Administrative expenses (1,254) (851) -------- --------- Operating profit Operating profit before impairment of 391 670 intangible fixed assets Impairment of intangible fixed assets (442) - Operating (loss)/profit - continuing operations (51) 670 Interest payable (374) (412) -------- -------- (Loss)/profit on ordinary activities before (425) 258 taxation Tax on (loss)/profit on ordinary activities 68 (38) ------- -------- (Loss)/profit on ordinary activities (357) 220 after taxation Minority interests (10) 31 -------- -------- (Loss)/profit for the financial year (367) 251 ======== ======== (Loss)/basic earnings per ordinary share (5.9)p 3.9p ======== ======== (Loss)/diluted earnings per ordinary share (5.9)p 3.7p ======== ======== Consolidated Balance Sheet at 31 December 2008 2008 2007 £'000 £'000 Fixed assets Intangible assets - positive goodwill and other intangible 229 688 assets - negative goodwill (343) (400) Tangible assets 13,002 14,681 ----------- ------------ 12,888 14,969 ----------- ------------ Current assets Stocks 44 49 Debtors 516 562 Cash at bank and in hand 5 8 ----------- ------------ 565 619 Creditors: amounts falling due within one (2,536) (2,226) year ----------- ------------ Net current liabilities (1,971) (1,607) ----------- ------------ Total assets less current liabilities 10,917 13,362 Creditors: amounts falling due after more (4,720) (4,947) than one year Provisions for liabilities and charges (189) (254) ---------- ---------- Net assets 6,008 8,161 ========== ========== Capital and reserves Called up share capital 3,000 3,000 Share premium account 250 250 Revaluation reserve 2,383 4,032 Share based payment reserve 18 9 Profit and loss account 199 508 ---------- ---------- Equity Shareholders' funds 5,850 7,799 Equity minority interest 158 362 Total shareholders' funds 6,008 8,161 =========== =========== NOTES 1. The calculation of earnings per share for the 12 months to 31st December 2008 is based on the weighted average number of shares throughout the period of 5,999,449 (2007: 5,968,843) 2. The directors have proposed a final ordinary share dividend of 0.5p per share, which will be paid on 11th May 2009 to shareholders on the register on the 14th April 2009. A preference share dividend of 1.5875 pence per share was paid on the 30th June 2008 and the 31st December 2008. 3. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st December 2007 and 31st December 2008 but is derived from them. The auditors have reported on the statutory accounts for both financial years. Their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 4. The annual report to shareholders will be sent to all shareholders week commencing 13th April 2009 and will also be available on the Company's website www.wellingtonmarkets.co.uk. The directors of the issuer (Wellington Market Company plc) accept responsibility for this announcement. 1