APPENDIX 3
Supplementary memorandum submitted by
Royal Armouries International PLC (PAC 00-01/177)
As requested, please find attached scenarios
and sensitivities regarding repayment of the Private Sector Debt
("PSD").
These are compared to the base case which was
the repayment schedule agreed with Bank of Scotland in July 1999.
In addition to the loan repayment, the preference shares, which
are wholly owned by the Bank of Scotland also form part of the
PSD, are assumed to be redeemed five years after the loan has
been repaid in full. There are two scenarios:
Scenario 1 is the base case as mentioned
above which used the KPMG visitor forecast as at June 1999, these
peak at 263,000 per annum. PSD is fully repaid by 2031 and the
20 per cent royalty to RA flows from 2032.
Scenario 2 is an updated base case which
shows incremental revenues from the Clarence Dock development
commencing in late 2004. The base case had assumed these to be
receivable from late 2001 but this will not now be the case. PSD
is fully repaid by 2039 and the 20 per cent royalty to RA flows
from 2040.
There are two sensitivities to scenario 2:
Sensitivity 1 which has visitors reaching
a plateau of 350,000 per annum. PSD is fully repaid by 2030 and
the 20 per cent royalty to RA flows from 2031.
Sensitivity 2 which has visitors reaching
a plateau of 400,000 per annum on the back of fully free admissions.
PSD is fully repaid by 2025 and the 20 per cent royalty to RA
flows from 2026.
As you will see, visitors numbers again have
a significant influence on RAI's ability to pay down the PSD,
as does the success of the Clarence Dock Development when completed.
In all these cases, annual inflation of 2.5 per cent has been
assumed, and interest is charged on the bank loan at the agreed
rate of 5.39 per cent. All available cash generated during the
year is used to pay down against the loan.
I trust this satisfies your request, however,
please feel free to contact me if you need any clarification.
Finance Director, Royal Armouries PLC
26 February 2001
NOTE 1: EXPENDITURE ON MARKETING THE ROYAL
ARMOURIES MUSEUM IN LEEDS TO JULY 1999
| 1995 and prior
| 1996 | 1997
| 1998 | 1999
| Total |
RAI plc | £553,520
| £1,173,077* | £785,522
| £558,114 | £367,136
| £3,437,369 |
Armouries' contribution | £202,228
| £83,000 | £96,795
| £107,000 | £62,417
| £551,440 |
Total | £755,748
| £1,256,077 | £882,317
| £665,114 | £429,553
| £3,988,809 |
* Includes launch.
NOTE 2: ROYAL ARMOURIES: CONSULTANTS' COSTS (All figures
rounded to the nearest £1,000)
(a) Consultants' costs prior to the opening of the Royal
Armouries' Leeds museum in 1996 were £4,553,000*.
(b) Of this sum £78,000 was spent on visitor forecasts
(from 1991 until the opening), and £551,000 on Schroders,
the financial advisors to the projects. The bulk of the rest of
the expenditure was on architects, engineers and surveyors.
(c) After the Museum opened the private company Royal
Armouries International plc spent a further £88,000 on visitor
forecasts.
(d) Since the Museum opened the Royal Armouries has spent
£231,000 on consultants fees, mainly in 1999 in the run up
to the re-structuring deal.
(e) In 1999-2000 the Department for Culture, Media and Sport
spent £67,000 on the Report by Pricewaterhouse Coopers to
establish the sustainability of the Royal Armouries Leeds Museum.
* net of £175,000 solicitors costs and Bank legal fees in
respect Royal Armouries International plc.
SUMMARY TABLE OF CONSULTANTS' COSTS
Item | Period
| Amount |
Consultants' fees incurred on the Leeds Armouries
| Prior to opening in 1996 |
£4,553,000 |
Of which spent on visitor forecasts |
| £78,000
|
Consultants fees incurred by RAI plc on visitor forecasts
| From opening in 1996 to July 1999
| £88,000 |
Consultants' fees incurred by Royal Armouries
| From opening in 1996 |
£231,000 |
Consultants' fees incurred by DCMS on the Royal Armouries
| Since July 1999 | £67,000
|
Grand total |
| £4,939,000 |
Of which total spend on visitor forecasts
| | £166,000
|
| 2000 Forecast
| 2001 Forecast |
2002 Forecast |
Growth at | 0.00%
| 0.00% | 0.00%
|
RPI at | 2.50%
| 2.50% | 2.50%
|
BANK OF SCOTLAND ORIGINAL FINANCIAL PROJECTIONBASE
CASE
Visitor numbers per KMPG | 190,000
| 204,000 | 236,000
|
Museum related turnover | 1,976,340
| 2,059,758 | 2,190,931
|
Clarence Dock revenues | 0
| 57,120 | 161,080
|
Costs | -1,824,034
| -1,888,903 | -1,930,920
|
Free cash generated | 152,306
| 227,975 | 421,091
|
Debt profile |
| |
|
Opening debt | -13,530,000
| -10,807,245 | -11,162,008
|
Interest at 5.3921% | -729,551
| -582,737 | -601,867
|
Free cash repaid | 3,452,306
| 227,975 | 421,091
|
Closing debt | -10,807,245
| -11,162,008 | -11,342,783
|
Loan repaid by 20**, prefs by 20**.
Visitor numbers per KPMG forecast of June 1999.
Clarence Dock Benefits come in from late 2001.
RA 20 per cent royalty payable from 2032.
ORIGINAL PROJECTIONS WITH KPMG FIGURES BUT WITH DELAYED
CLARENCE DOCK BENEFITS
Visitor numbers per KMPG | 190,000
| 204,000 | 236,000
|
Museum related turnover | 1,977,600
| 2,085,342 | 2,225,560
|
Clarence Dock revenues | 0
| 0 | 0
|
Costs | -1,837,296
| -1,942,981 | -1,945,245
|
Free cash generated | 140,304
| 142,361 | 286,315
|
Debt profile |
| |
|
Opening debt | -13,822,000
| -14,426,992 | -11,762,549
|
Interest at 5.3921% | -745,296
| -777,918 | -634,248
|
Free cash repaid | 140,304
| 3,442,361 | 280,315
|
Closing debt | -14,426,992
| -11,762,549 | -12,116,482
|
Loan repaid by 20**, prefs by 20**.
Visitor numbers per KPMG forecast of June 1999.
Clarence Dock Benefits come in from late 2004.
RA 20 per cent royalty payable from 2040.
BANK OF SCOTLAND ORIGINAL FINANCIAL PROJECTIONBASE
CASE
2003 | 2004
| 2005 | 2006
| 2007 |
Forecast | Forecast
| Forecast | Forecast
| Forecast |
0.00% | 0.00%
| 0.00% | 0.00%
| 0.00% |
2.50% | 2.50%
| 2.50% | 2.50%
| 2.50% |
253,000 | 263,000
| 263,000 | 263,000
| 263,000 |
2,289,093 | 2,372,480
| 2,431,792 | 2,492,587
| 2,554,902 |
342,265 | 449,717
| 460,960 | 472,484
| 484,296 |
-2,058,445 | -2,159,288
| -2,160,870 | -2,213,742
| -2,267,935 |
572,912 | 662,909
| 731,882 | 751,329
| 771,262 |
-11,342,783 | -11,381,485
| -11,332,277 | -11,211,443
| -11,064,646 |
-611,614 | -613,701
| -611,048 | -604,532
| -596,617 |
572,912 | 662,909
| 731,882 | 751,329
| 771,262 |
-11,381,485 | -11,332,277
| -11,211,443 | -11,064,646
| -10,890,000 |
ORIGINAL PROJECTIONS WITH KPMG FIGURES BUT WITH DELAYED
CLARENCE DOCK BENEFITS
2003 | 2004
| 2005 | 2006
| 2007 |
253,000 | 263,000
| 263,000 | 263,000
| 263,000 |
2,329,164 | 2,416,313
| 2,476,720 | 2,583,638
| 2,602,104 |
0 | 73,640
| 194,940 | 324,107
| 427,210 |
-2,032,460 | -2,087,495
| -2,111,282 | -2,234,314
| -2,334,622 |
296,703 | 402,458
| 560,378 | 628,431
| 694,692 |
-12,116,482 | -12,473,112
| -12,743,217 | -12,869,965
| -12,935,495 |
-653,333 | -672,563
| -687,127 | -693,961
| -697,495 |
296,703 | 402,458
| 560,378 | 628,431
| 694,692 |
-12,473,112 | -12,743,217
| -12,869,965 | -12,935,495
| -12,938,298 |
BANK OF SCOTLAND ORIGINAL FINANCIAL PROJECTIONBASE
CASE
2008 | 2009
| 2010 | 2011
| 2012 |
Forecast | Forecast
| Forecast | Forecast
| Forecast |
0.00% | 0.00%
| 0.00% | 0.00%
| 0.00% |
2.50% | 2.50%
| 2.50% | 2.50%
| 2.50% |
263,000 | 263,000
| 263,000 | 263,000
| 263,000 |
2,618,774 | 2,684,244
| 2,751,350 | 2,820,133
| 2,890,637 |
496,403 | 508,813
| 521,533 | 534,572
| 547,936 |
-2,323,483 | -2,380,421
| -2,438,781 | -2,498,601
| -2,559,916 |
791,694 | 812,636
| 834,102 | 856,105
| 878,657 |
-10,890,000 | -10,685,506
| -10,449,043 | -10,178,364
| -9,871,087 |
-587,200 | -576,173
| -563,423 | -548,828
| -532,259 |
791,694 | 812,636
| 834,102 | 856,105
| 878,657 |
-10,685,506 | -10,449,043
| -10,178,364 | -9,871,087
| -9,524,689 |
|