Update Report February 2008

Georgica:
This company owns and operates the biggest chain of bowling centres in the UK with 38 locations ranging from Exeter to Birmingham to London, representing approximately 20% of the UK market. The chain’s locations are known as Tenpin and contain American pool, licensed food bars and arcade areas as well as the main bowling area. The company was listed on the AIM in October 2000 and has a market capitalisation of £30.2m. In 2006 the company decided to refurbish its estate and this refurbishment was completed in 2007. On August 28th 2007 the company sold off its cue sports business; Riley’s for £34.9m, this was following the announcement that the company had contracted to sell and leaseback 53 freehold properties for £71m.

Georgica’s business is now solely the operation of its tenpin bowling operations, however the company has maintained an additional 10 freehold properties which it intends to hold in order to re-develop these properties or in order to sell them. The company is also in the process of developing seven new build sites that it intends to open between now and 2010.

In 2006 the company introduced a booking system to its website and began to experiment with variable online pricing; depending on such variables as time of booking, location and type of client. This form of variable price online booking is expected to become more streamlined this year as the previous year was used to build up experience and data using the system. Georgica has announced that it has been approached by several parties that have been interested in acquiring the company however to date no such transaction has been completed.

The company is expected to release its financial reports for the end of the 2007 shortly.

The company has ceased issuing its quarterly reports following the completion of the repayment of its 2012 Floating Rate Notes and has reverted to the more standard half year reporting cycle. Company Revenue increased marginally in the first half of last year to £66.8m from £64.8m in 2006. Despite this marginal increase in revenues the company reported a pre-tax loss of £654,000 as well as increased costs due to corporate transactions of £2.2m

Georgica’s share price had been in decline throughout last year and that trend did not appear to be slowing. Following a large transaction executed by Schroders plc in the company’s shares on December 3rd Georgica’s share price fell from 91.5p per share to 48p per share over a period of ten days.

Source: London Stock Exchange

On the 12th of December the company announced that the offer period for a group of parties who had been interested in making an offer for the company had expired. If a new buyer for the company becomes apparent, with a correctly tailored offer then it is possible that the company’s share price may jump. Alternatively if the company in its annual report which is soon to be released announces that it has returned to profitability and has reduced its debt then shareholders may see a reversal of the declining share price.

Gamingking:
The Group’s primary business areas are in the provision of a variety of gaming and entertainment related activities including; lottery services, fundraising concepts, entertainment products and gameplay peripherals. The company aims its products primarily at the private members’ club market such as golfing clubs. Founded in 1993 and listed on the AIM in 1996 Gamingking has expanded organically and through acquisition over the years and include three wholly owned subsidiaries; Kelly's Eye No. (1) Ltd, Lotteryking Ltd and Logoking Ltd.

Kelly’s Eye is responsible for all of the Group’s sales and marketing activities that are related to lotteries and its other game play products. This Hemel Hempstead based subsidiary was acquired in 2005 but has a nationwide salesforce.

Lotteryking provides vending machines, pull-tab lottery tickets and online lottery solutions to the Group’s clients. This was the Group’s original business however following the acquisition of Kelly’s Eye this Essex based business has changed its focus to providing technical support services, manufacturing, R&D and purchasing.

Logoking was originally known as Designer Tech, however following its acquisition in 2004 the business was re-named. This division provides private member’s clubs with logo-embroidered leisure and work wear often used by club staff or during sporting events.

The Group has a fourth trading division; Managementking. This division aims to support and aid organizations that are attempting to operate a Society Lottery through the provision of professional operational management and consultancy services that include an external lottery manager’s certificate.

The market in which the group has been operating in has not been expanding as fast as the Group and its shareholders would have liked. The Group’s management has therefore begun examining methods of increasing market share as well as examining alternative outlets for the Group’s products and services.

Between 2006 and 2007 the company lost its profitability, recording an after tax profit of £51,000 in 2006 but a £6,000 loss for 2007. This was partly due to the market that has been described as ‘at best flat and at worst declining.’
Source: Gameking.co.uk

Over the time period just mentioned the Group’s revenues declined by £156,000 which ate away at previous years slim profit margin. More recently the Group’s losses have continued to increase however the Group has stated that historically its winter period is characterised by stronger sales. There is some concern that the effect of the smoking ban in England will begin to become apparent and may reduce sales to many locations.

The Group’s share price peaked earlier this year at 1.75p per share however it has since declined and there has been no market price movement since the 22nd of November 2007. Many investors may be waiting to see if the company’s next set of financial results due in April will bring news of an improved position.
gamingking
Source: London Stock Exchange

The Group is making a considerable gross profit (£3.1m, 2007) given its revenues (£5.1m, 2007) and this could be seen as a sign of the strength of many of the Group’s underlying products and services. The half year loss of £125,000 is an increase from the earlier loss of just £6,000 however as a proportion of the Group’s revenue it is still considerably small and may be reversed soon. The Group is currently in the process of consolidating all of its production, warehousing and distribution activities and this consolidation is expected to yield both cost and operational benefits to the Group.

Laura Ashley:
This well known brand has created a variety of fashionable home furnishings as well as its own brand women’s fashion apparel. The business originally started in the early 1950’s with the now well known Laura Ashley selling fabrics and head scarves from her flat in London. Over time the range of clothing and designs offered increased and so did the demand for these products. Despite Laura Ashley’s death in 1985 the company has continued to remain a strong name in the fashion and furnishing industries. That same year the company was floated on the London Stock Exchange. MUI Asia Limited has the largest shareholding in the company since 1998 and its shareholding and commitment has greatly influenced the direction of the company over the years.

Laura Ashley now has franchise businesses across the Far East, Australia, Scandinavia and South America however its production operation is located in Newton, Powys.

The company has recently returned to some of the styles and designs used in the 1960s and 1970s in its ‘Archive Collection’. This collection is made from organic cotton and the company has been quick to realise the potential sales of ‘green products’. Laura Ashley is a member of the FTSE4Good index, meaning that the company has satisfied the benchmarks and criteria of corporate responsibility set out by the index.

In 2007 Laura Ashley was awarded the House and Garden magazine’s Design Retailer of the Year awarded. This award was given based on votes by the magazines readership and can be seen as a good indication of the perception of many consumers to the company and its products. Laura Ashley has over 190 stores in the UK, following the opening of an additional 13 stores last year, 101 of which are mixed product stores, 65 of which exclusively sell home products and 30 of which are Home concession stores. In all the company’s total selling space increased by 8%.

The increased number of new stores follows the near doubling in the company’s profits from 2006 to 2007. For the end of the company’s 2007 financial year post tax profits of £8m were reported, up from £4.2m the previous year. This trend appears to have continued throughout 2007 and although the company’s annual report is expected in the next few months its revenues and profits increased throughout the first half of 2007. Profit for the period increased by 121% to £4.2m and revenue increased by 6.94% over the same period.

Over the past year the company’s share price has fallen by 15.7% with one of the largest falls occurring in early June last year. Since July last year the company’s share price has remained highly volatile allowing many investors to generate capital returns through more active trading. For example an investor buying shares on the 14th of September and then selling on the 4th of October could have generated returns of 26%. A noticeable positive trend in the company’s share price or an announcement of a significant corporate improvement may entice more long-term investors to the company.
laura ashley
Source: London Stock Exchange

Laura Ashley’s Chairman, Mr Khoo believes that the continued store realignment, improved product offering and increased efficiency in the company will continue to generate profits. Shareholders will likely benefit from this increased profitability through increased dividend payments. Laura Ashley has continued to pay dividends to its shareholders and its 5th of June payment was a 100% increase on the previous year, however this year’s 17th January payment has remained at the same level of 0.5p per share

Cains Beer Company:
This company has its roots as far back as 1858 when its founder, Robert Cain acquired an established brewery site in Liverpool. The company was an independent brewer until 1985 when it was acquired by Boddingtons. Following the subsequent acquisition of Boddingtons by Whitbread, the sale of the company to The Danish Brewery Group and its re-naming, the company was finally acquired by the Dusanj Brothers in 2002 and operated as Robert Cain & Company Limited until its recent reverse acquisition by Honeycombe Leisure Plc. In 2004 the company launched it’s the First Premium British Lager and the following year Cains became the official beer of Liverpool; the 2008 European Capital of Culture.

The company now sells its lagers, ales and stouts to its own 109 pubs as well as third party pubs, wholesalers, supermarkets and independent retailers. The Cains brewing plant has the capacity to produce approximately 300,000 barrels of beer per year and it is estimated that the company brews more than 120 million pints annually. Cain’s Beers have won many awards over the years including the 2000 Brewing Industry International Award for its ‘Cains Dark Mild’ beer and second prize for ‘Cains FA’ as well as winning prizes in the Tesco Beer Challenge and the CAMRA beer festival.

The brewing, selling and marketing of the Cains brands of beers is handled by the company’s brands division, one of three divisions that the company operates. The company’s contracts division handles the packaging and brewing contracts for third parties and the retail division concentrates on the seven tenanted pubs, two managed pubs and the brewery tour that are all operated by Cains.

The recent purchase of the brand and brewery by the Dusanj brothers has renewed much of the business. New innovations and new brands have been launched such as the Fine Raisin Beer that won the Tesco’s Autumn Beer Challenge in 2003.

The brewery is now one of the fastest growing breweries in the country and was also one of the first to implement responsible drinking advice on beer labels, winning praise from many health and safety advisors.

Following the announcement of the reverse acquisition of Cains Beer Company by Honeycombe Leisure Plc on the 14th May 2007 shares in the company skyrocketed. From the 15th of May to the 15th of June 2007 the company’s shares gained 248% in value.

Source: London Stock Exchange

Previous to this movement trading in the company’s shares had been temporarily suspended. The takeover was described as a ‘reverse takeover’ due to the size of Honeycombe Leisure Plc at that time and the fact that Honeycombe Leisure Plc changed its name to Cains Beer Company Plc following its acquisition.

Financially since the takeover the company has been re-organising and consolidating its positions. The new management has closed some loss making business operations resulting in a 12.9% reduction in sales. However this action has greatly reduced the company’s after tax losses from £10.6m to £1.7m. Payment of dividends has not been recommended with the management of Cains Beer Company and it is possible that any future profits could be re-invested into the company in order to ensure continued growth and development.

The continued development and expansion of the beers and services offered by Cains may soon reverse its loss making position. The company now has over 60% of its estates pouring Cains Finest Lager and has implanted new smoking facilities across its locations in order to maintain sales. A strengthened management team and increased business development may return this company to profitability.

Havelock Europa:
Concentrating on UK markets this company is a leading provider of a variety of interior products to the retail, healtcare, hotel, corporate office and financial services, as well as providing point of sale merchandising and educational furniture and supplies.

Formed in the 1970s and listed on the London Stock Exchange in 1987 Havelock Europa has aimed to deliver outstanding performance and innovative approaches to the sectors in which it specialises outlined above. In 2007 the company won the Shop fitter of the Year award at the Retail & Leisure International Awards in London and also won the Scottish Modern Apprenticeship Awards for its cooperation with Lauder College.

Over the past ten years the Group has had a strategy of acquiring complementary and diverse businesses and in the last four years alone has acquired three businesses; TeacherBoards Ltd (2004), Clean Air Ltd (2004) and Stage Systems Ltd (2007). This acquisition strategy has led to the Group having a very diverse structure incorporating eight different businesses across the UK;

• Showcard Display – Bespoke Point of Sale display solutions
• Showcard Print – Design and production of point of sale prints
• Clean Air – Varieties of Fume Cupboards and extraction systems
• TeacherBoards – Display, writing and projection systems
• ESA Healthcare – Interiors for Dentists, Labs and other healthcare requirements
• Stage Systems – Staging systems and varieties of furniture
• ESA McIntosh – Varieties of furniture for education and labs
• Havelock Interiors – interiors for retail, financial services, hotels and accommodation

These diverse businesses provide Havelock with a more secure source of revenue than one single business and at the same time allow for the Group to benefit from synergies between the different businesses.

With the exception of a 2003/04 the Group has steadily increased its revenues year on year and at the same time has also increased its post tax profits and earnings per share ratio. These increases have allowed the Group to provide its shareholders with increasing dividends. The Group’s end of year results are not expected until the 8th of April this year however it is expected by the Board that these will show that the company has yet again increased its pre-tax profits. The Interim results for 2007 showed that the company had increased its revenue for the period by 22% and that profit for the period increased 42% resulting in a 305 increase in earnings per share.

Despite these figures the company’s share price has fallen considerably in the past few months, possibly due to the prevailing market conditions. Analysts at the Financial Times currently rate the company at ‘outperform’ and have done for the last three months.
Havelock Europa
Source: London Stock Exchange

The company has had an average growth rate of 3.89% and a return of investment of just over 10% however the company has also been experiencing increases in the costs of goods sold and this has contributed to a fall in net income despite the large increases in revenues.
Havelock Europa revenue
Source: The Financial Times