RNS Number:0906U
Honeycombe Leisure PLC
12 January 2004



12 January 2004


                               HONEYCOMBE LEISURE PLC
                                  ("the Company")
                             UNAUDITED INTERIM RESULTS


      Honeycombe Leisure plc, the AIM listed owner-operator of 91 pubs 
           is today pleased to announce unaudited interim results 
                    for the six months to 26th October 2003

HIGHLIGHTS

  * Like for Like Turnover up 0.6% to #16.19m (2002: #16.09m)
  * Underlying like for like sales performance for the half year is 3% up
    after factoring in the effect of last year's World Cup
  * Adjusted profit before tax* of #0.90m (2002: #1.01m).  Loss before tax of
    #17,000 (2002: Profit of #853,000)**
  * Adjusted EPS* up 15% at 3.1p (2002: 2.7p).  Basic EPS of (0.0003)p (2002:
    2.1p)**
  * Gearing significantly reduced to 205% (2002: 284%)
  * Board is pleased to recommend an interim dividend up 5.5% to 0.95p (2002:
    0.90p)

  * Bar & Food margins up by 0.6% and 2.5% respectively over previous half
    year period
  * 20 sites added since December 2002 under Management Contract work, an
    increase of 30% of the overall portfolio
  * Nectar yielding above-target profitability - 14 sites now trading; rapid
    acceleration in fees
  * Completion of Management Agreement in December 2003 for 6 sites operating
    as Ma Hubbards
  * Improved overall banking facilities from October 2003 will help to
    significantly reduce future finance costs


Sandy Anderson, Chairman of Honeycombe Leisure plc, commented

"Profits from Honeycombe's own estate have remained stable and have provided an
excellent and solid base on which to grow our Management Services Division.  The
pleasing development of the management agreements with Punch, Nectar and now
with Ma Hubbards, is proving an exciting and increasingly profitable side to our
business.  We look forward to energetically growing this division during this
transitional stage in our development.

The Company is well placed to take advantage of further opportunities in a
rapidly changing and consolidating sector"

* Management use results that write back amortisation of goodwill, profit on
sale of assets and financial hedging costs as a primary measure to provide a
better comparison of underlying business performance

**Statutory numbers




Enquiries to:

Honeycombe Leisure PLC
James Baer, Joint Chief Executive           Tel:  020 7929 5599 (on 12 &13.1.04)
Bryan Wardman, Joint Chief Executive        Tel:  01772 723 764 (thereafter)
Paul Snape, Finance Director


Holborn
Tarquin Edwards / Chris Steele              Tel:  020 7929 5599




Notes to Editors

Ma Hubbards

In December 2003, Honeycombe announced that it had concluded a management
agreement with the Great English Pub Company ("GEPC") to manage all 6 of GEPC's
sites, which operate under the Ma Hubbards concept.  Ma Hubbards is a value for
money dining concept geographically situated within Honeycombe's existing
footprint, with a combined turnover of circa #3.5 million.  The concept has
proved a successful formula and Honeycombe will retain the Intellectual Property
rights to the concept and any franchise merchandise.  The management agreement
is for 10 years, with an option to purchase after Year 4.


Nectar Taverns

In July 2002, Honeycombe concluded a management agreement with Nectar Taverns
Plc ("Nectar"), a VCT qualifying vehicle, to provide management services in the
formation and operation of a pub estate to be developed by Nectar.  Nectar is
currently investing in excess of #10 million in developing a chain of unbranded
public houses in the North of England and Wales.  Nectar now has fourteen
freehold units, which continue to yield returns above targeted levels, and they
represent an investment of 50% of the funds available to Nectar.



UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 26 OCTOBER 2003

Chairman's Statement

Honeycombe's long held strategy of running unbranded mid market managed houses
remains very much unchanged. However, the changing dynamics of the marketplace
continue to highlight the separation of Pub Ownership and Pub Management. The
consolidation of ownership into the hands of major players such as Punch Taverns
and Enterprise Inns, who have low cost funding structures, continues apace. In
such a climate, we believe that the Company's growth prospects are very much
linked to using our ability to leverage upon our proven management skills,
infrastructure, local knowledge and relationships to run and yield substantial
management fees on high quality units owned by large and small owners alike.


Results

Turnover for the period reduced to #16.43m (2002: #16.88m), reflecting the
inclusion in the previous year of #0.75m of sales, which was attributable to
four sites, which have since been sold.  On a like for like basis though, sales
were up 0.6% to #16.19m (2002: #16.09m).  The loss before tax of #17,000,
reflects the #700,000 charge of non-recurring hedging costs, which include the
discharge of the instruments (further details below).  On an adjusted basis
(which is after adding back goodwill amortisation, profit on sale of assets, and
financial hedging costs), Honeycombe saw a profit before tax of #0.90m (2002:
#1.01m), reflecting this transitional period for the Company.

The adjusted earnings per share was 3.1p (2002: 2.7p).  A reconciliation of the
adjusted earnings per share is shown in Note 3 to the interim results statement.


Dividend

The Board has declared an interim dividend of 0.95p (2002: 0.90p) per share, an
increase of 5.5%.  This will be paid on 22 April 2004 to shareholders on the
register on 26 March 2004.


Financing

The strong growth in management income in the second half of this year is very
encouraging. On the back of this progress, we were able to place 1.75m shares in
the market in December at 65p, raising #1,137,500 before expenses, both with new
and existing investors. This money is to fund working capital on both Ma
Hubbards and on new deals as they materialise. We currently have 91 sites under
our management and a capacity to absorb incremental units with modest additional
cost.

The renegotiations of banking facilities did take more time than we originally
anticipated, but was comprehensive and yielded terms that the Board is pleased
with. One of the key achievements was to discharge in October, the negative
value of two fixed-rate financial instruments. These were inherited from the
acquisition of the Devonshire Pub Company in March 2001, which obligated the
Company to pay the difference between 6.25% and Libor rate on a principal of
#15m up to October 2006. The total hedging cost in the period was #700,000
including the cost of discharging the instruments of #533,000.

The half-year to October 2003 should be regarded as a transitional period for
the Company with management fee income only partially offsetting the loss of
earnings from the Punch sale and manage-back. It should be remembered that our
gearing has fallen considerably since this time last year and was on 27 October
2003 at 205% (2002: 284%), and as our fee income increases, our earnings, cash
generation and dividends will rise accordingly.

The second half-year to April 2004 will see the benefit of the accelerating
management fees and the reduction in financing costs.


Trading Review

Overall our core estate has shown a small increase in profitability, despite
both an increase in National Insurance, Sky TV, and business insurance cover and
without the positive impact of an event like the World Cup in 2002. We believe
this to be a creditable achievement in a competitive environment and it has been
underpinned by our ability to increase both wet and food margins and to
carefully control costs.

We spent just over #1.0m in the period on selective capital improvements, most
notably at Arena in Liverpool, the Kendal Arms in Kendal and the Last Orders in
Morley.

We have now purchased, re-developed and opened 13 freehold sites for Nectar
trading as Last Orders with high levels of draught beer consumption and one
Tavern unit. We believe that we have created substantial 'added value' in Nectar
which is not only benefiting us by way of management fees but through extra
capital value attributable to our share option of up to 15% of Nectar's ordinary
share capital, exercisable on disposal.

Christmas trading was marginally below the corresponding period last year, but
taking allowance for the World Cup impact in 2002, we are still ahead for the
half year, which we believe to be a solid achievement in a challenging trading
environment.


Site progress

In February 2003 we took the decision to sell and manage-back twelve units to
Punch Taverns.  The proceeds of #11.7m were used to reduce the Company's level
of gearing and facilitated in the re-negotiation of our new banking facilities.

More importantly, this was a prototype deal with Punch Taverns, who now own over
7000 sites following their acquisition of Pubmaster.  In November, we then took
over the management of our first new Punch financed site - The Pooley Bridge
Hotel at Ullswater - and are looking at further opportunities. Both companies
are keen to develop the relationship either on an individual unit or portfolio
basis.

In December, we refined the owner / operator concept to complete a deal with the
Great English Pub Company to operate six units trading as Ma Hubbards. It is a
value for money dining concept, which has proved a successful formula, which we
aim to develop both on newly identified sites and selectively within our
existing estate.

We opened a further four sites on behalf of Nectar Taverns in December to bring
the number trading up to fourteen. Nectar's return on capital has been above
20%, well above forecast. The fee contribution to Honeycombe in the year to
April 2003 was only #26,000 growing to #94,000 for the half year to October
2003. This figure is expected to at least double in the second half of the year.
Bearing in mind that this only represents investment of 50% of the funds
available to Nectar, the Board believes that the acceleration in fees will be in
excess of #500,000, once full investment is reached.


Prospects

The second half of the current financial year will benefit significantly from
rapidly rising Nectar management fees, further improvements in purchasing terms
for bar and food supplies, and from the new Ma Hubbard sites acquired in
December.

In addition we will have the full benefit of the new banking terms which were
completed right at the end of the first half year and the elimination of hedging
costs which in the first half year amounted to #167,000.

We are continuing to step up the search for more management fee deals. The money
raised from the share placing is immediately available for such projects.


Sandy Anderson
Chairman
12 January 2004


Group Profit and Loss Accounts

                                                                 Unaudited         Unaudited            Audited
                                                            6 months ended    6 months ended         Year ended
                                                 Notes     26 October 2003   27 October 2002      27 April 2003
                                                                                    Restated
                                                                     #'000             #'000              #'000

Turnover                                                            16,439            16,878             32,971

Cost of sales
- trading                                                          (9,645)          (10,134)           (20,034)


Gross profit                                                         6,794             6,744             12,937

Distribution expenses                                                (222)             (267)              (419)

Administrative expenses

 -      exceptional items                                                -                 -              (610)
 -      amortisation of purchased goodwill                           (216)             (216)              (432)
 -       other                                                     (4,722)           (4,099)            (7,945)

Administrative expenses                                            (4,938)           (4,315)            (8,987)


Operating profit                                                     1,634             2,162              3,531


(Loss)/Profit on Sale of properties                                    (3)               157              1,858


Profit on ordinary activities before interest                        1,631             2,319              5,389

Underlying Interest                                                  (948)           (1,363)            (2,604)
Hedging Costs Incurred                                               (167)             (103)              (207)
Discharge of Instruments                                             (533)                 -                  -

Interest payable and similar charges                               (1,648)           (1,466)            (2,811)


(Loss)/Profit on ordinary activities before                           (17)               853              2,578
taxation
Taxation on profit of ordinary activities            4                   9             (239)              (642)


(Loss)/Profit on ordinary activities after                             (8)               614              1,936
taxation


Equity dividends                                     2               (298)             (267)              (938)


Retained (Loss)/Profit for the period                                (306)               347                998

Basic earnings per share                             3           (0.0003)p              2.1p               6.6p

Fully diluted earnings per share                     3           (0.0003)p              2.1p               6.6p

Adjusted earnings per share                          3                3.1p              2.7p               4.5p



Consolidated Balance Sheet
                                                             Unaudited           Unaudited             Audited
                                                       26 October 2003     27 October 2002       27 April 2003
                                           Notes                                  Restated
                                                                 #'000               #'000               #'000

Fixed assets

             Intangible assets                                   6,883               7,315               7,100
             Tangible assets                                    45,313              56,403              44,749

                                                                52,196              63,718              51,849

Current assets

             Stocks                                                889                 822                 941
             Debtors - due within one year                       1,632               1,793               1,310
             Cash at bank and in hand                              719                 909               1,834

                                                                 3,240               3,524               4,085

Creditors: Amounts falling due within one
year                                                           (5,950)            (11,626)             (9,401)
                                                             
Net current liabilities                                        (2,710)             (8,102)             (5,316)

Total asset less current liabilities                            49,486              55,616              46,533

Creditors: amounts falling due after more
than one year                                                 (31,319)            (38,013)            (28,050)

                                                              
Provisions for liabilities and charges

Deferred taxation                                              (2,276)             (2,057)             (2,286)


Net assets                                                      15,891              15,546              16,197

Capital and reserves

             Called up share capital                               296                 288                 296
             Share premium account                              16,074              16,082              16,074
             Profit and loss account                             (479)               (824)               (173)

Equity shareholders' funds                                      15,891              15,546              16,197



Group Cash Flow Statement

                                                               Unaudited           Unaudited            Audited
                                                          6 months ended      6 months ended         Year ended
                                                         26 October 2003     27 October 2002      27 April 2003
                                                                   #'000               #'000              #'000

Operating profit                                                   1,634               2,162              3,531

Amortisation of goodwill                                             216                 216                432
Depreciation charges                                                 482                 618              1,113
Change in stock                                                       53                  20              (100)
Change in debtors                                                  (323)               (294)                441
Change in creditors                                                (436)               (153)              (679)
                                                    

Net cash inflow from operating activities                          1,626               2,569              4,738

Servicing of finance                                             (1,648)             (1,515)            (2,972)

Capital expenditure                                              (1,046)             (1,325)            (2,126)
Disposals                                                            (3)                 950             14,203
Equity dividends paid                                              (641)               (722)            (1,007)


Net cash inflow before financing                                 (1,712)                (43)             12,836

Financing                                                          1,650             (1,262)           (11,545)

(Decrease)/increase in cash                                         (62)             (1,305)              1,291



  Reconciliation of net cash flow to movement in net debt.

(Decrease)/Increase in cash in the period                           (62)             (1,305)              1,291
Cash flows from changes in debt and financing                    (1,650)               1,829             12,112


Change in net debt resulting from cash flows                     (1,712)                 524             13,403


Non cash changes                                                       -               (157)              (206)


Movement in net debt                                             (1,712)                 367             13,197


Net debt brought forward                                        (30,887)            (44,569)           (44,084)


Net debt carried forward                                        (32,599)            (44,202)           (30,887)




Notes

1        Basis of Preparation

The financial information for the 6 months ended 26 October 2003 and the 27
October 2002 are unaudited, but have been reviewed by the Group's auditors, and
have been prepared on the basis of accounting policies adopted in the financial
statements for the 12 months to 27 April 2003.

The financial information for the 6 months ended 27 October 2002 has been
restated to reflect the directors' revised view of the estimated useful lives of
certain fixtures and fittings, and the period over which deferred income should
be recognised.  The effect of this has been to increase the depreciation charge
by #93,000, to reduce gross profit by #95000, to decrease the deferred taxation
charge by #56,000, and to reduce net assets by #132,000.

In the financial statements for the year ended 28 April 2003 prior period
adjustments reducing consolidated net assets by #822,809 were made.  These
adjustments have therefore been reflected in the opening and closing balance
sheets for the 6 months ended 27 October 2002.

The results for the 12 months ended 27 April 2003 are an abridged version of the
full accounts, which carried an unqualified auditor's report and which have been
filed with the Registrar of Companies.



2        Dividends

                                                                              Unaudited               Unaudited
                                                                         6 months ended          6 months ended
                                                                        26 October 2003         27 October 2002
                                                                                  #'000                   #'000

      Proposed interim dividend on equity shares - 0.95p per
      share (2002: 0.90p)                                                        298                     267

                                                                  


3        Earnings per Ordinary Share


Earnings per share is calculated as follows:


                                                           Unaudited            Unaudited               Audited
                                                      6 months ended       6 months ended            Year ended
                                                     26 October 2003      27 October 2002         27 April 2003
                                                               #'000                #'000                 #'000

         (Loss)/Profit after taxation                            (8)                  614                 1,936

         Amortisation  of goodwill                               216                  216                   432

         Adjust for exceptional items                              -                    -                   610

         Adjust for Hedging Costs                                700                  103                   207


         Profit on Sale of Assets                                  3                (157)               (1,857)
                                                                   

         Adjusted retained profit                                911                  776                 1,328
                                                                                          

         Weighted average number of shares
         In issue (No)
                   -           basic                      29,644,300           29,188,836            29,412,875
                   -           diluted                        11,858               38,686                11,858

                                                          29,656,158           29,227,522            29,424,733

         Earnings per share
                   -           basic                       (0.0003)p                 2.1p                  6.6p
                   -           diluted                     (0.0003)p                 2.1p                  6.6p
                   -           adjusted                         3.1p                 2.7p                  4.5p


4        Taxation

Provision for taxation has been made at 50% of profits for the period, being the
effective rate of taxation expected to be applicable in the year ended 25 April
2004.


5        Post balance sheet events

On 1 December 2003, 1,750,000 new Ordinary shares of 1p each were placed at 65p
and admitted to AIM. The placing raised #1,137,500 before costs.

On 15th December 2003, a Management Contract was completed to operate 6 sites
trading as Ma Hubbards, owned by the Great English Pub Company Ltd. The deal
includes an option to purchase the freehold interest.


6        General

The interim financial statements for the six months ended 26 October 2003 were
approved by the board of directors on 6 January 2004.

The interim financial information set out above does not constitute full
accounts within the meaning of Section 240 of the Companies Act 1985.

The interim report will be distributed to shareholders in due course.





Independent review report by KPMG Audit Plc to Honeycombe Leisure Plc

Introduction

We have been engaged by the company to review the financial information set out
on pages 3 to 8 and we have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority.  Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose.  To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors.  The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom.  A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed.  A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit.  Accordingly we do
not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended  26 October 2003.


KPMG Audit Plc
Chartered Accountants
Preston
12 January 2004

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