Select Committee on Public Accounts Appendices to the Minutes of Evidence


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 PROJECTION—BASE 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 PROJECTION—BASE 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 PROJECTION—BASE 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




 
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