TIDMSHEP
RNS Number : 9168A
Shepherd Neame Limited
28 September 2022
Shepherd Neame
Preliminary results for the 52 weeks to 25 June 2022
Shepherd Neame, Britain's Oldest Brewer and owner and operator
of over 300 high quality pubs in Kent and the Southeast, today
announces results for the 52 weeks ended 25 June 2022.
The period under review has been dominated by the impact of
COVID-19 in the first half and by the effects of the war in Ukraine
in the second half. In this context, we are pleased to have
achieved the strong rebound in sales and profits.
Significant growth in revenue, a return to profits and final
dividend recommended
-- Statutory profit before tax was GBP7.4m (2021: loss of GBP(16.4)m)
-- Basic earnings per share was 42.5p (2021: loss per share of (120.5)p)
-- Underlying basic earnings per share[1] was 39.4p (2021: loss per share of (55.5)p)
-- EBITDA[2] rose significantly to GBP23.4m (2021: GBP7.7m)
-- Final dividend of 15.00p recommended which together with the
interim dividend of 3.50p, makes a total of 18.50p for 2022 (2021:
nil; 2019: 30.08p)
-- Net assets per share[3] increased from GBP11.40 as at 26 June
2021 to GBP11.94 as at 25 June 2022
-- Tight cash management has resulted in net debt, excluding
lease liabilities[4], being reduced to pre-pandemic levels,
allowing for the resumption of investment in the existing estate
and new pubs. Net debt, excluding lease liabilities 4 , as at 25
June 2022 was GBP75.3m (2021: GBP90.8m)
Strong operational performanc e
-- Retail Pubs and Hotels (63 pubs):
-- Total retail like-for-like sales[5] were -8% vs 2019[6] and
+130% vs 2021 for the 52 weeks to 25 June 2022 with footfall
outside London near normal and strong in our coastal estate
-- Retail like-for-like sales 5 inside the M25 (25 pubs and hotels) were
-30% vs 2019 6 and +263% vs 2021. Outside of the M25 (38 pubs
and hotels), retail like-for-like sales 5 were +1% vs 2019 6 and
+104% vs 2021
-- Total like-for-like drink sales were -16% vs 2019 6 and +168%
vs 2021 and like-for-like food sales were -1% vs 2019 6 and +94% vs
2021
-- Total like-for-like accommodation sales were +25% vs 2019 6 and +111% vs 2021
-- Four high quality pubs acquired post year-end for GBP6.7m
-- Tenanted Pubs (231 pubs): Following our strong support during
the pandemic, like-for-like tenanted pub income[7] was +1% vs 2019
6 and +119% vs 2021
-- Brewing and Brands:
-- Good sales momentum with total beer volumes[8] +7% vs 2019 6 and +27% vs 2021
-- Own beer volumes[9] were -8% vs 2019 6 and +16% vs 2021
-- The business is largely protected from the worst of the
energy inflation through fixed price contracts at below market
rate: the brewery through to 2024 and retail pubs through to March
2023
Encouraging trading over the summer
-- For the 13 weeks to 24 September 2022, retail like-for-like
sales 5 were level with 2020[10] and +9.4% vs the 2022[11]
financial year
-- For the 13 weeks to 24 September 2022, retail like-for-like
sales 5 inside the M25 (25 pubs and hotels) were -11.0% vs 2020 10
and +50.6% vs 2022 11 . Outside of the M25 (38 pubs and hotels),
retail like-for-like sales 5 were +4.7% vs 2020 10 and -0.4% vs
2022 11
-- For the 9 weeks to 27 August 2022, like-for-like tenanted pub
income 7 was +2.9% vs 2020 10 and +12.8% vs 2022 11
-- For the 13 weeks to 24 September 2022, total beer volumes 8
were +5.6% vs 2020 10 and +1.2% vs 2022 11 . Own beer volumes 9
were +4.4% vs 2020 10 and +14.4% vs 2022 11
Outlook
-- Fundamentals of the business remain strong. Demand is
encouraging and the business is in good shape. Short term may be
challenging with many political and economic uncertainties
ahead
-- Government assistance on energy costs for consumers and for
business is warmly welcomed but further material inflation still
anticipated in the coming year
-- Business is well placed for the long term as our geographic
heartland is undergoing significant infrastructure development and
we continue to seek good opportunities to enhance our portfolio of
high-quality pubs
Jonathan Neame, CEO of Shepherd Neame, said:
"Shepherd Neame has rebounded well from the challenges of the
last two years - a testament to the strength of the business model
and depth of talent across the business.
The Company has strengthened its balance sheet through tight
cash management and net debt reduction and continues to evolve
operationally to meet changes in the market.
Our business is in good shape and has traded well through the
summer. Whilst we are cautious about the winter ahead and the
inflationary environment, we retain an optimistic view for the
business and continue to seek investment and acquisition
opportunities for the long term."
27 September 2022
ENQUIRIES
Shepherd Neame Tel: 01795 532206
Jonathan Neame, Chief Executive
Mark Rider, Chief Financial
Officer
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
NOTES FOR EDITORS
Shepherd Neame is Britain's oldest brewer. Established in 1698
and based in Faversham, Kent it employs around 1,600 people.
At the reporting date, the Company operated 300 pubs, of which
231 were tenanted or leased, 63 managed and six were held as
investment properties under commercial free of tie leases. 85% of
the estate is freehold. The pub estate ranges from inns and hotels
to destination dining, great traditional and local community
pubs.
The Company brews, markets and distributes its own beers to
national and export customers under a range of highly successful
brand names including traditional classics such as Spitfire and
Bishops Finger as well as newer brands, such as Whitstable Bay and
Bear Island.
The Company also has partnerships with Boon Rawd Brewery Company
for Singha beer, Thailand's original premium beer and with Boston
Beer Company for Samuel Adams Boston Lager and Angry Orchard Hard
Cider.
Shepherd Neame's shares are traded on the AQUIS Stock Exchange
Growth Market. See http://www.aquisexchange.com/ for further
information and the current share price.
For further information on the Company, see
www.shepherdneame.co.uk .
Chairman's statement
Overview
I am pleased to report a significant growth in revenue on last
year and a return to profit for the Company.
Whilst this year's result does not represent a full recovery to
the levels of profitability seen in 2019 - the last year
pre-pandemic - it does represent a substantial recovery of the
majority of our cashflow and operating profit.
Performance was dominated by the impact of COVID-19 and its
aftermath, and by consequences of the war in Ukraine: specifically
by the ongoing restrictions on hospitality in July 2021 and
December 2021, as well as unexpected and material cost impacts from
importing certain essential products, and temporary industrial
action from our logistics provider.
We now face more general and widespread cost inflation and much
higher energy costs. Inflation provides a new dimension of
complexity to management decisions, a dimension which has been
absent for many years.
Forecasting at all times is hazardous. The Nobel Prize-winning
economist Kenneth Arrow, employed by the US Air Force during the
Second World War as a meteorologist, quickly realised that his
medium-term weather forecasts were no better than randomly right
and asked to be relieved of this responsibility. The response came
back: "the commanding general is well aware that your forecasts are
no good. However, they are essential for planning purposes."
Inflation complicates forecasting because it is unstable and hard
to predict, and especially when some of the present inflationary
pressures result from supply shortages arising from lockdown and
from the conflict in Ukraine. These may be ephemeral.
Our best estimate is that we will not see full recovery of
profitability in the Company's business to pre-pandemic levels
before 2024/25 as a consequence of the ongoing energy crisis. We
have no doubt that there will be surprises along the way, perhaps
some good surprises. In any event, management will need to be both
as flexible and as steadfast as it has been in the last few years
in order to extract the best result amidst many uncertainties.
The difficulties of the immediate past for a business largely
dependent on congregation, the current inflationary background, and
the dire forecasts for consumer spending have combined to create a
good deal of gloom in the pub and brewing sector. We observe the
surveys of consumer sentiment anxiously but we do not share this
pessimism. People like pubs. The underpinnings of the business
remain strong.
In the short term, the evidence so far in the new financial year
is that many consumers remain willing to spend and enjoy the
conviviality and sense of community which our pubs offer.
Throughout the pandemic, management has shown great agility and
adaptability to ever-changing circumstances. I hope that
shareholders will feel proud of the way we have supported our
licensees, our teams and our communities and impressed by the
various actions and initiatives we have taken to maintain the
essence and spirit of the Company. The Company is ready to face
whatever economic or external challenges are thrown at us in the
coming year.
I would like to thank all in the Shepherd Neame team for their
relentless hard work and the senior team for their leadership,
often under extreme pressure. I also thank our lenders and
shareholders for their patience and understanding as we navigated
each step of the way. I am pleased we can report a return to more
normal debt levels and the restoration of a meaningful
dividend.
Our efforts were recognised with the award of AQSE Company of
the year at the Small Cap Awards 2022.
strategy
The focus in the last year has been to restore our balance sheet
and profitability sufficiently to be in a position to resume
dividends and take advantage of whatever opportunities arise.
We remain convinced that our business - local, authentic,
community-focused, customer-orientated, with a long-term family
outlook - is essentially strong, with attributes increasingly
valued by consumers. We value personal relationships highly and
have a reputation for looking after our people well.
Our teams are very closely connected to local markets; pubs are
at the heart of their communities. This local knowledge gives us a
privileged insight into the needs of our customers as well as
helping us make informed investment decisions.
Our strategy is to build on the brand reputation of Shepherd
Neame, by developing a portfolio of unique and individual pubs and
distinctive and characterful beers.
We aim to delight our customers with great experiences, and so
create passionate advocates for our beers and pubs.
We remain firmly committed to the three different parts of our
business to help us deliver our goals: retail pubs and hotels,
tenanted pubs and brewing and brands. Retail pubs and hotels give
us the direct relationship with consumers and are our principal
engine for long-term growth; tenanted pubs are strongly linked with
their communities and provides part of the asset and cashflow
backbone of our business; brewing and brands is key to recruiting
new customers and building our brand equity.
Financial Results
Our accounts are prepared on an IFRS (International Financial
Reporting Standards) basis. Revenue for the 52 weeks to 25 June
2022 was GBP151.5m (2021: GBP86.9m), an increase of +74% on the
prior year which was significantly impacted by the COVID-19
pandemic.
Statutory operating profit was GBP10.4m (2021: statutory
operating loss of GBP(10.5)m). Underlying operating profit was
GBP12.9m (2021: underlying operating loss of GBP(4.2)m).
Statutory profit before tax was GBP7.4m (2021: statutory loss
before tax of GBP(16.4)m). Underlying profit before tax was GBP7.3m
(2021: underlying loss before tax of GBP(10.1)m).
Basic earnings per share was 42.5p (2021: basic loss per share
of (120.5)p).Underlying basic earnings per share was 39.4p (2021:
underlying basic loss per share of (55.5)p).
Net assets per share increased from GBP11.40 in June 2021 to
GBP11.94.
Dividend
The Board feels that the Company's recovery is sufficiently well
established to resume dividend payments.
At the half year, we paid an interim dividend of 3.50p (2021:
nil). This compares with the interim dividend of 6.00p that was
declared and subsequently cancelled in March 2020.
We are now proposing the first final dividend to be paid since
October 2019, of 15.00p. This compares with the final dividend of
2019 of 24.21p, and represents dividend cover for the full year of
2.1 times on underlying earnings per share of 39.4p.
Board changes
Jonathon Swaine joined us on 27 June 2022 as Managing Director,
Pubs. He joins us from Rank Group Plc, having spent the majority of
his career in the pub industry, initially at Bass plc from 1997 to
2005, and then 14 years at Fuller, Smith and Turner plc. He is an
experienced and proven operator.
At the same time, Nigel Bunting took on a new role as Commercial
Director, overseeing the brewing, sales, procurement and supply
chain operations.
Summary
In its long history, Shepherd Neame has experienced many
economic crises and downturns. It survives them because the
business model is fundamentally robust, because we provide a
product and service that people want even in the hard times, and
because we constantly adapt to the wider industry trends and change
to meet the needs of our local market. More broadly, Shepherd Neame
is a business that is trusted, with a management that is
trusted.
While there will be challenges ahead over the next 12 months and
beyond, nothing is likely to compare with the challenge of being
closed for the best part of a year in 2020.
As a long-term business, we see opportunity as well as challenge
in times of turbulence - as evidenced by the acquisitions made post
year end. We are positioned to take advantage of similar
opportunities that may arise.
The business has recovered its momentum. The team is full of
ambition, energy and new initiatives and I have no doubt this
momentum will continue in the coming year.
Richard Oldfield
Chairman
Chief Executive's Review
Overview
I am extremely proud of the way the business has rebounded after
the challenges of the last two years. To have grown our revenues
and recovered the majority of our operating profit - compared with
2019 - is testament to the strength of the business, and the
resilience and agility of our team members in adapting to ever
changing circumstances.
At almost every step of the way since pubs were allowed to
re-open their gardens in April 2021, there have been fresh hurdles
to cross, and new and unexpected challenges, which have either
impacted trading or resulted in higher costs for the business.
We have controlled cash tightly, reduced our net debt and
strengthened the balance sheet so that we are able to resume
dividend payments and investment in the business.
Consumer demand so far has remained robust, in spite of having
to pay higher prices for most goods and services. It is anticipated
that consumer demand over the coming winter may soften, as the high
energy and fuel bills squeeze disposable income. Having coped with
the greater challenge of the long periods of closure during the
COVID-19 pandemic, over which we had no control, we feel able to
deal with these issues as they arise.
The business is now back on a firm footing. Whilst the road to
full recovery may take slightly longer than originally anticipated
as a result of inflationary pressures, the next few years may also
present some great long-term opportunities for the business and so
we look forward to the future with confidence.
Meeting the COVID challenge
Initially, we anticipated "freedom day" would come in June 2021,
but this was delayed by six weeks to end July 2021, with ongoing
restrictions still in place. As demand recovered, many goods and
services were in short supply, particularly food products and
materials for the building trade. Finding new team members was
difficult and it has proved challenging to fill certain roles, such
as chefs and kitchen staff, ever since.
As these challenges started to settle, we were faced with
disruption in our logistics and supply chain, with short-term
industrial action from our service provider and exceptionally high
costs of international freight for our beer imports.
Throughout the autumn, we experienced materially higher costs
and delays for international shipments of beer and wine. The back
to work momentum started to build, workers returned to offices in
London, and the prospects rose for a busy Christmas trade, until
the Omicron variant struck, which resulted in substantial
cancellations and more waste.
As the fears about Omicron started to subside, trade through
February and early March was most encouraging, before the Ukraine
war brought fresh concerns.
We enjoyed excellent trade in the week leading up to Easter, and
over the May bank holiday. The Platinum Jubilee celebrations gave
us a small boost, but the train strike impacted the final month of
the year.
Meeting the Inflation Challenge
Throughout this period, there have been three major economic
phases, each of which has had a cost impact on our business:
-- the first was the inflationary surge in the summer of 2021,
driven largely by suppressed demand during the pandemic;
-- the second was the removal of the reduced rate of VAT at the
end of March, and the move to the higher national insurance rate
and higher national minimum wage; and
-- the third was the second inflationary wave driven by energy
and cereal shortages, as a consequence of the war in Ukraine.
All three of these phases have increased our cost base, and we
have had no option but to pass on these costs with higher prices.
Consumers have so far shown remarkable resilience to this
inflation, as our strong recent trade demonstrates. The demand for
socialising, particularly after the restrictions of the last two
years, is encouraging, and previous experience suggests that people
are more likely to prioritise spending on going out, over other
discretionary or delayable expenditure.
During the last year, the Company received GBP2.4m in furlough,
grants and business rates relief (2021: GBP15.0m), to compensate
for periods of ongoing restrictions.
Across the business we have experienced material inflation
across our cost base above the prevailing rate of RPI: in retail
pubs and hotels, this is driven mainly by the higher national
minimum wage, national insurance and electricity costs; in the
brewery, mainly by higher CO(2) and packaging costs.
So far, we have been largely protected from an even higher
inflationary impact by long-term fixed price purchasing contracts.
In the brewery, we are fully fixed on gas and electricity prices
through to September 2024; while in the retail pubs we are fully
fixed through to March 2023, and fixed on two-thirds of our
anticipated requirement through to September 2024. In both cases,
our current fixed prices are substantially below the prevailing
market price, albeit, in the retail pubs, we will nonetheless incur
incremental costs in the coming year of GBP1.2m for utility
procurement.
We have secured all our malt and hops requirement through to the
end of calendar 2023.
In the coming year, we expect further inflation. Our known
principal exposure is in energy-related products, specifically
glass and CO(2) , and potential further increases in national
minimum wage levels above those previously announced.
Our tenanted licensees will be exposed to these same
inflationary forces to varying degrees, although will be protected
through the winter by the Energy Bills Relief Scheme.
Following a full market tender, we are in discussions to extend
our logistics contract. This is likely to result in a materially
higher price than presently, as our existing contract rebases to
normal market levels, and as all logistics providers tackle the
impact of driver shortages and the high cost of fuel.
Aside from the inflationary forces we remain concerned about the
impacts that any industrial action may have on our business.
The Market
Total market beer volumes have recovered to pre-pandemic levels,
despite the extraordinary disruption of the last two years. Certain
trends, such as on- versus off-trade beer consumption are just
starting to normalise; other trends such as city centre footfall
and in-bound tourism will take slightly longer.
Certain consumer trends that were evident pre-pandemic continue
to evolve, for example the trend towards premiumisation, on the one
hand, and moderation - in the form of lower alcohol and less
calories - and economising on the other. We continue to develop our
business to adapt to these trends.
Tourism started to recover in summer 2022, with more visitors
than expected from the US, but overall in-bound international
tourism remains significantly below pre-pandemic levels and this is
not expected to recover in full until 2024.
The inflationary challenge will drive higher prices for beer and
food, and tighter margins for most retailers. Higher energy costs
and higher interest rates are likely to squeeze consumers'
disposable income.
Operational Overview
Tenanted and Retail Pub Operations
As at 25 June 2022, we owned 300 pubs (2021: 310) of which 231
(2021: 235) are tenanted or leased and 63 (2021: 65) are retail
pubs. Six (2021: 10) are operated as free of tie investment
properties. 85% of our pubs are freehold.
During the period we have transferred two tenanted pubs to
retail pubs, one retail pub to tenanted and three tenanted pubs to
investment property. We have sold two freehold pubs, surrendered
one leasehold pub and sold investment property and land (2021: two
freehold pubs and investment property and land) for total proceeds
of GBP9.1m. This includes two hotels, the Royal Wells, Tunbridge
Wells and the Conningbrook, Ashford for GBP5.75m. These disposals
in total have realised a profit of GBP1.7m. We anticipate further
transfers from tenanted to retail in the coming year.
We did not invest in any major capital projects during the first
half of the year and focused instead on our external signage and
decoration programme. We have maintained our pubs at a high level.
In the second half we resumed our capital programme with notable
projects to refresh the Old Mill, Ashford and upgrade the White
Horse, Boughton-under-Blean, as well as other smaller projects in
gardens and outside areas.
In the coming year, we intend to resume the major development
programme that was stalled during the pandemic, and have identified
the Crown at Rochester, the Crown at Chislehurst and the Tom Cribb
in Haymarket as priority projects. Subject to relevant permissions
being granted, we hope to commence the build of our new pub site at
Ebbsfleet by the end of the current financial year, but this venue
is not due to open until end 2024.
We have invested in our digital infrastructure with an upgrade
of the wi-fi network in our pubs. This will improve the customer
experience and allow us to create stronger customer engagement. We
have also enhanced our pub websites. We have an ongoing digital
transformation strategy to build better awareness through data and
drive stronger marketing connections with our customers and so
build loyalty.
We are constantly reviewing our food and drink offer to provide
our customers with a premium experience, whilst addressing the
needs of increasingly more calorie and price conscious consumers.
We expect to be able to mitigate cost inflation in food and drink
through careful buying, price increases and menu management.
Retail Pubs and Hotels
Our retail pubs and hotels are the principal engine for growth.
We are targeting 100 outlets in this division in the medium term.
We have identified a number of sites within our existing estate
that are suitable for management in due course. Many of these sites
would benefit from major redevelopment.
We are investing to enhance our offer and the people experience,
to build our digital infrastructure and to develop our customer
engagement.
For the 52 weeks to 25 June 2022, the retail pubs achieved
like-for-like sales of -8% vs the 2019 6 financial year, but were
+130% vs 2021. We have returned to profit.
Within this performance, retail like-for-like sales were -19% vs
20196 in July 2021, due to the delay in lifting restrictions, and
-25% vs 20196 in December 2021, as Omicron impacted footfall. In
most other periods, we were running close to or above 2019
levels.
Like-for-like drinks sales were -16% vs 2019 6 and +168% vs
2021; like-for-like food sales were -1% vs 2019 6 and +94% vs
2021.
Like-for-like accommodation sales were +25% vs 20196 and +111%
vs 2021. Occupancy was 76% (20196: 76%; 2021: 31%) and RevPAR was
GBP80 (2019 6 : GBP67; 2021: GBP32).
Footfall outside of London has been near normal - except during
periods of restrictions - particularly at those coastal pubs and
hotels which benefit from their unique locations and great outside
space. We have 25 retail pubs inside the M25. Footfall here
increased steadily throughout the autumn - until Omicron -, but
resumed quickly in February, and has continued to build month on
month. We expect the back to office momentum to continue through
Autumn 2022, though we recognise that pre-pandemic office patterns
are unlikely to recover in full.
For the 52 weeks to 25 June 2022, our retail estate inside the
M25 achieved like-for-like sales of -30% vs 20196, but were +263%
vs 2021. Outside of the M25, retail like-for-like sales were +1% vs
2019 6 and +104% vs 2021.
Tenanted Pubs
Trade in our tenanted pubs has followed roughly the same pattern
as in retail, with a weak July and December, when restrictions were
in place, followed by good trade in the autumn, and early spring
and summer. Volumes were impacted by the supply chain difficulties
in September, and remain lower than pre-pandemic levels.
For the 52 weeks to 25 June 2022, like-for-like tenanted pub
income was +1% vs 20196 and +119% vs 2021. In the restriction-free
periods, income levels were generally above the equivalent month in
2019. For those periods where restrictions were in place, we
provided a 10% discount on rent to our licensees, helped them
secure grants and provided other advice.
Despite the economic and inflationary challenges facing the
sector, the turnover of licensees has remained low thanks in part
to the excellent support we have given our licensees during the
pandemic. Although there is a shortage of applicants, as with other
areas of the economy, we remain able to attract good-quality
candidates.
We have again registered good scores in the industry Tenant
Tracker benchmark survey and are one of the most respected tenanted
pub operators in the sector.
Capital and Investment
We have maximised our cashflow by restricting core capital
expenditure to GBP5.4m (2021: GBP3.9m), from more normal levels of
GBP10m-GBP14m and by realising GBP9.1m in disposal of non-core
assets. We plan to increase core capital expenditure in the coming
year to be in line with historic levels.
Since the year end we have acquired three popular pubs in Essex
- all freehold - from the East Anglia Pub Company and one leasehold
site in Bournemouth. The aggregate investment in these acquisitions
is GBP6.7m. All four pubs will be operated in the retail
division.
The three in Essex are near Southend-on-Sea. They are all
characterful pubs, including the very popular 16th century dining
venue, the Bellhouse in Leigh-on-Sea. These acquisitions build on
our presence in south Essex. Urban Reef in Bournemouth has been one
of our many free-trade customers in the area and enjoys a
spectacular location on the beach at Boscombe.
Brewing and Brands
The underlying trends in this division are encouraging. Volume
has been good, but cost inflation has been significant.
For the 52 weeks to 25 June 2022, total beer sales were +7% vs
20196 and +27% vs 2021. Own beer volume was -8% vs 20196 and +16%
vs 2021.
In 2019, we took the decision to strengthen our on-trade local
Heartland team, and as business has resumed this has paid good
dividends, as we are winning some excellent new business, and high
profile accounts in an ever wider geography. We have built great
new brand platforms with Bromley FC, Remarkable Pubs and the Pig
Hotel Group in particular.
As anticipated, trade through the grocers has been lower this
year, as the on-trade has re-opened. The off-trade is now c. 60% of
the overall beer market.
Our more mature brands such as Spitfire and Bishops Finger still
deliver substantial volumes, but our marketing increasingly
supports our Whitstable Bay and Bear Island portfolios, both of
which have proved very popular with customers.
That portfolio is now strengthened with the brewing of Singha
beer at Faversham, as from March 2022, in partnership with the Boon
Rawd Brewery. This will not only reduce import costs materially,
but also gives us an exciting and super-premium world lager, to
enhance our enviable and unique brand portfolio.
This portfolio will be strengthened further in the coming year
as we commission our small batch brewery. This will enable us to
develop taste and flavour profiles that are hard to achieve in a
larger plant, and so will provide an exciting and dynamic new beer
range for our customers.
We have again this year showcased our brands at various high
profile events. In March we were the official beer of the Oxford
and Cambridge University Boat Race on the Thames; in July, we were
once again chosen as the supplier to the 150th Open Golf in St
Andrews. In addition we have supported many local events such as
the Black Deer Festival and the Pig Hotel Smoked and Uncut
Festival.
Investment Property
As at 25 June 2022, the Company owns investment property valued
at GBP6.7m (2021: GBP6.1m). We have sold seven investment
properties during this period as part of our plan to reduce debt
incurred during the pandemic.
We continue to work on promoting a number of sites in and around
Faversham which we believe are suitable for residential development
as part of the overall local plan. Faversham has seen substantial
housing development in the last few years and more is anticipated
as demand in the area increases.
Financing, Cashflow and Net Debt
The principal focus of the Board over the last two years has
been to manage cashflow as tightly as possible, to restrict cash
outflow during times of closure and to maximise cash inflow during
periods of trading.
In 2020 we took an additional CLBILS loan to give us additional
headroom and were granted relaxation of banking covenants by our
lenders. These could have remained in place until September 2022,
but through good trading and active property management, we reduced
our debt position sufficiently quickly to be able to terminate
these arrangements at the end of March 2022. We have returned to
our previous covenant tests on other debt.
During the year we generated underlying EBITDA (earnings before
interest, tax, depreciation and amortisation) of GBP23.4m (2021:
GBP7.7m).
Statutory net debt, including lease liabilities, was GBP131.2m
(2021: GBP149.1m), made up of GBP75.3m of bank and private
placement debt, and GBP55.9m of lease liabilities.
Net debt, excluding lease liabilities, fell sharply from
GBP90.8m in the prior year to GBP75.3m. At the end of the 2021
financial year, GBP2.4m of VAT was deferred in agreement with HMRC
and was settled in full by the year end 2022.
This rapid debt reduction has given us the confidence to resume
investment again. We have substantial headroom. At the year end our
covenant leverage was 3.7:1. Our medium-term covenant leverage
target remains at 3:1.
Post Year End
Since the year end, we have extended our long-term financing. We
have taken an additional GBP20m private placement from BAE Systems
Pension Fund, for a term of ten years, at a fixed rate of 5.47%.
This sits alongside the 20-year private placement for GBP35m, that
we issued with the same lender in 2018, at a rate of 3.99%.
This extends our total long-term committed facilities, at a time
of economic uncertainty, and reduces our overall cost of debt. We
are in the process of renewing our revolving credit facilities.
These steps provide with us a sound funding platform to take
advantage of any opportunities that arise in the future.
Environment and our Community
We have carried out extensive research in this area in the last
year, established an ESG steering committee and clarified our goals
as:
-- to become carbon neutral (scopes 1 and 2) by 2030;
-- to become carbon neutral in our supply chain (scope 3) by 2040; and
-- no waste to landfill by 2025.
We have made good progress in a number of areas. We are founder
members of the Zero Carbon Forum and have led the pilot of the
Green Mark programme in a group of pubs. We have entered into a new
waste contract to support our goal of zero waste to landfill.
We have consolidated the purchase of energy across the business
and now buy 100% electricity from renewable sources. We are
planning a major solar installation on one of the brewery
buildings. We continue to roll out electric vehicle rapid charging
points in our pubs.
We have launched a variety of initiatives to raise funds to
support the great work of Kent Wildlife Trust and we supported the
Platinum Jubilee Green Canopy project by planting a series of small
fruit tree orchards at our pubs.
Building a Great Team of Dedicated People
To meet the challenges of recruiting staff, we have chosen to
strengthen our People Team. We have recruited several new roles in
this area under our People Director, Kate Ware, including
appointing People Partners for each part of the business and an
Apprenticeship Lead.
We have also installed new software to help us manage the
recruitment process more effectively, and carried out an in-depth
survey to identify areas where we can improve the people experience
and build clearer career paths.
We are fortunate that our people are so passionate about the
Company, their roles and the teams they work with. I would like to
thank them for their commitment and extraordinary hard work, in
such difficult circumstances, in the last year.
Current Trading
Trading over the summer has been encouraging.
July and August have been boosted by exceptionally dry, warm and
sunny weather. This has driven drinks sales in particular.
Occupancy has remained high, but overall accommodation sales are
slightly lower than last year as people returned to overseas
holiday destinations after the staycation boom of 2021. Food is in
line with recent trends, slightly lower than 2019, but strong
nonetheless.
Many towns have reinstated local events and festivals, such as
the Faversham Hop Festival and Broadstairs Folk Week, which provide
a welcome boost to those communities. Our new acquisitions have
performed well and in line with expectations. Urban Reef in
particular has produced some exceptional trading weeks.
For the 13 weeks to 24 September 2022, retail like-for-like
sales were level with 202010 and +9.4% vs 2022 11 .
For the 13 weeks to 24 September 2022, our retail estate inside
the M25 achieved like-for-like sales of -11.0% vs 202010 and +50.6%
vs 2022 11 . Outside of the M25, retail pubs achieved like-for-like
sales of +4.7% vs 202010 and were in line with 2022 11 .
Like-for-like tenanted pub income for the nine weeks to 27
August 2022 was +2.9% vs 202010 and +12.8% vs 2022 11 .
Beer volumes have remained strong throughout the summer, driven
primarily by Heartland sales, and offset by declines in the
off-trade and the rebalancing between on- and off-trade sales
post-pandemic. Total beer volume for the 13 weeks to 24 September
2022 was +5.6% vs 202010 and +1.2% vs 2022 11 . Own beer volume was
+4.4% vs 202010 and +14.4% vs 2022 11 .
We continue to incur high costs in all areas of the business,
which we expect to persist throughout the year.
Summary and Outlook
There are many economic and political uncertainties ahead, and a
recession is forecast.
In this context we warmly welcome the recent government
announcement to support consumers and businesses manage their way
through the utility crisis. This will provide considerable relief
for those tenanted pubs who are not on fixed contracts. In other
parts of the business we have fixed price contracts that are below
the market rate.
In line with many in the industry, the current energy crisis
will hold back full recovery. However, previous experience would
suggest that the beer and hospitality sector is more resilient than
most to such an environment, and that consumers will prioritise
this over spend in other areas. The pandemic has shown that
socialising in a pub remains core to our way of life. As such,
whilst the short-term market conditions may be challenging, this
may also prove to be a time of great long-term opportunity.
Furthermore, the ongoing house building and infrastructure
projects continue to turn our heartland into a larger and more
affluent community. Of note this year is the opening of the
Elizabeth Line, with its terminus in North Kent, and the
development of a new Thanet Parkway station. Both these projects
will bring shorter journey times to London and so support the
hybrid lifestyle that people desire. We are well positioned to
capitalise on these economic and lifestyle trends in the
future.
After the hard work to rebuild momentum post-pandemic, we now
have the confidence to move forward, to resume investment and seek
good-value opportunities when they arise.
Jonathan Neame
Chief Executive
GROUP INCOME STATEMENT
For the 52 weeks ended 25 June 2022
52 weeks ended 25 June 52 weeks ended 26 June
2022 2021
------------------ ---- ============================================= =============================================
Items excluded Items excluded
Underlying from underlying Underlying from underlying
results results Total statutory results results Total statutory
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
1,
Revenue 2 151,538 - 151,538 86,884 - 86,884
Other income 1 383 - 383 2,839 - 2,839
Operating charges 3 (139,028) (2,470) (141,498) (93,963) (6,307) (100,270)
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
Operating
profit/(loss) 3 12,893 (2,470) 10,423 (4,240) (6,307) (10,547)
Net finance costs 3 (5,599) (83) (5,682) (5,817) (471) (6,288)
Fair value
movements on
financial
instruments
charged to profit
and
loss 3 - 397 397 - 115 115
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
Total net finance
costs (5,599) 314 (5,285) (5,817) (356) (6,173)
Profit on disposal
of
property 3 - 1,709 1,709 - 221 221
Investment
property fair
value movements 3 - 520 520 - 87 87
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
Profit/(loss)
before taxation 7,294 73 7,367 (10,057) (6,355) (16,412)
Taxation 4 (1,462) 375 (1,087) 1,868 (3,247) (1,379)
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
Profit/(loss)
after taxation 5,832 448 6,280 (8,189) (9,602) (17,791)
------------------ ---- ---------- ---------------- --------------- ---------- ---------------- ---------------
Earnings/(loss)
per 50p
ordinary share 6
Basic 42.5p (120.5)p
Diluted 42.3p (120.5)p
All results are derived from continuing activities.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 25 June 2022
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------ ---- -------- --------
Profit/(loss) after taxation 6,280 (17,791)
Items that may be reclassified subsequently to profit
or loss:
Gains arising on cash flow hedges during the period 2,596 1,605
Income tax relating to these items 4 (561) (166)
Items that will not be reclassified subsequently to
profit or loss:
Unrealised gain on revaluation of property - 31
------------------------------------------------------ ---- -------- --------
Other comprehensive gains 2,035 1,470
------------------------------------------------------ ---- -------- --------
Total comprehensive income/(loss) 8,315 (16,321)
------------------------------------------------------ ---- -------- --------
GROUP STATEMENT OF FINANCIAL POSITION
As at 25 June 2022
Group Group
25 June 26 June
2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
Non-current assets
Goodwill and intangible assets 375 328
Property, plant and equipment 274,651 285,063
Investment properties 6,716 6,068
Other non-current assets - 5
Right-of-use assets 44,235 47,311
--------------------------------------- --------- ---------
325,977 338,775
-------------------------------------- --------- ---------
Current assets
Inventories 8,067 7,320
Trade and other receivables 17,685 15,360
Cash and cash equivalents 5,579 5,560
Assets held for sale 1,099 2,419
--------------------------------------- --------- ---------
32,430 30,659
-------------------------------------- --------- ---------
Current liabilities
Trade and other payables (27,222) (26,383)
Borrowings (1,600) (1,600)
Lease liabilities (2,780) (5,100)
--------------------------------------- --------- ---------
(31,602) (33,083)
-------------------------------------- --------- ---------
Net current assets/(liabilities) 828 (2,424)
--------------------------------------- --------- ---------
Total assets less current liabilities 326,805 336,351
--------------------------------------- --------- ---------
Non-current liabilities
-------------------------------------- --------- ---------
Lease liabilities (53,106) (53,226)
Borrowings (79,270) (94,765)
Derivative financial instruments (2,353) (5,414)
Provisions - (498)
Deferred tax liabilities (14,749) (13,101)
--------------------------------------- --------- ---------
(149,478) (167,004)
-------------------------------------- --------- ---------
Net assets 177,327 169,347
--------------------------------------- --------- ---------
Capital and reserves
Share capital 7,429 7,429
Share premium account 1,099 1,099
Revaluation reserve 31 31
Own shares (660) (1,010)
Hedging reserve (1,489) (3,524)
Retained earnings 170,917 165,322
--------------------------------------- --------- ---------
Total equity 177,327 169,347
--------------------------------------- --------- ---------
CONSOLIDATED statement of changes in equity
For the 52 weeks ended 25 June 2022
Share
Share premium Revaluation Own Hedging Retained
capital account reserve shares reserve earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 27 June
2020 7,429 1,099 17 (1,328) (4,963) 182,982 185,236
Loss for the financial
year - - - - - (17,791) (17,791)
Gains arising on cash
flow hedges during the
year - - - - 1,605 - 1,605
Gains on revaluation
of property, plant and
equipment - - 31 - - - 31
Tax relating to components
of other comprehensive
income 4 - - - - (166) - (166)
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Total comprehensive
income/(loss) - - 31 - 1,439 (17,791) (16,321)
Revaluation reserve
realised on disposal
of properties - - (17) - - 17 -
Accrued share-based
payments - - - - - 428 428
Distribution of own
shares - - - 125 - (121) 4
Unconditionally vested
share awards - - - 193 - (193) -
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 26 June
2021 7,429 1,099 31 (1,010) (3,524) 165,322 169,347
Profit for the financial
year - - - - - 6,280 6,280
Gains arising on cash
flow hedges during the
year - - - - 2,596 - 2,596
Tax relating to components
of other comprehensive
income 4 - - - - (561) - (561)
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Total comprehensive
income - - - - 2,035 6,280 8,315
Ordinary dividends paid - - - - - (520) (520)
Accrued share-based
payments - - - - - 183 183
Distribution of own
shares - - - 101 - (99) 2
Unconditionally vested
share awards - - - 249 - (249) -
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 25 June
2022 7,429 1,099 31 (660) (1,489) 170,917 177,327
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
GrouP statement of cash flows
For the 52 weeks ended 25 June 2022
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---- -------- -------- ------- ---------
Cash flows from operating activities
Cash generated from operations 7 21,141 1,631
Income taxes received - 195
-------- -------
Net cash generated by operating activities 21,141 1,826
Cash flows from investing activities
Proceeds from disposal of property,
plant and equipment 5,792 383
Proceeds from disposal of investment
property 1 658
Proceeds from disposal of assets held
for sale 3,292 3,485
Purchases of property, equipment and
lease premiums (5,304) (3,878)
Purchase of intangible assets (129) -
-------- -------
Net cash generated by investing activities 3,652 648
Cash flows from financing activities
Dividends paid 5 (520) -
Interest paid (4,436) (4,796)
Payments of principal portion of lease
liabilities (4,220) (3,930)
Repayment of borrowings 7 (15,600) -
Proceeds from borrowings 7 - 2,000
Share option proceeds 2 5
-------- -------
Net cash used in financing activities (24,774) (6,721)
------------------------------------------- ---- -------- -------- ------- ---------
Net movement in cash and cash equivalents 19 (4,247)
Cash and cash equivalents at beginning
of the period 5,560 9,807
------------------------------------------- ---- -------- -------- ------- ---------
Cash and cash equivalents at end of
the period 5,579 5,560
------------------------------------------- ---- -------- -------- ------- ---------
Notes to the financial statements
25 June 2022
1 Segmental reporting
The accounting policy for identifying segments is based on
internal management reporting information that is regularly
reviewed by the Chief Operating Decision-Maker (CODM).
The Group has three operating segments, which are largely
organised and managed separately according to the nature of the
products and services provided and the profile of their
customers:
Brewing and Brands which comprises the brewing, marketing and
sales of beer and other products;
-- Retail Pubs and Hotels; and
-- Tenanted Pubs which comprises pubs operated by third parties
under tenancy or tied lease agreements.
-- Transfer prices between operating segments are set on an arm's-length basis.
As segment assets and liabilities are not regularly provided to
the CODM, the Group has elected, as provided under IFRS 8 Operating
Segments (amended), not to disclose a measure of segment assets and
liabilities.
Brewing Retail
and Pubs Tenanted
Brands and Hotels Pubs Unallocated(1) Total
52 weeks ended 25 June 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- ----------- -------- -------------- --------
Revenue 56,615 61,240 32,773 910 151,538
Other income - 383 - - 383
--------------------------------------- -------- ----------- -------- -------------- --------
Underlying operating (loss)/profit (252) 8,288 13,359 (8,502) 12,893
Items excluded from underlying
results - (1,899) (940) 369 (2,470)
--------------------------------------- -------- ----------- -------- -------------- --------
Segmental operating (loss)/profit (252) 6,389 12,419 (8,133) 10,423
Net underlying finance costs (5,599)
Finance costs excluded from underlying
results (83)
Fair value movements on ineffective
element of cash flow hedges 397
Profit on disposal of property 1,709
Investment property fair value
movements 520
--------------------------------------- -------- ----------- -------- -------------- --------
Profit before taxation 7,367
--------------------------------------- -------- ----------- -------- -------------- --------
Brewing Retail
and Pubs Tenanted
Brands and Hotels Pubs Unallocated Total
52 weeks ended 25 June 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ----------- -------- ----------- --------
Other segment information
Capital expenditure - tangible
and intangible assets 1,400 1,736 1,677 639 5,452
Depreciation and amortisation pre
IFRS 16 1,592 2,840 2,601 397 7,430
Depreciation and amortisation 1,695 4,614 3,601 570 10,480
Impairment of property, plant and
equipment, goodwill and assets
held for sale - 1,010 603 24 1,637
Impairment of right-of-use assets - 889 337 - 1,226
Underlying segmental EBITDA pre
IFRS 16 1,394 10,920 15,812 (8,143) 19,983
Underlying segmental EBITDA 1,508 12,882 16,967 (7,929) 23,428
Number of pubs - 63 231 6 300
---------------------------------- -------- ----------- -------- ----------- --------
1. GBP910,000 of unallocated income (2021: GBP1,050,000)
includes rent receivable from investment properties and other
non-core trading income. Unallocated expenses primarily represent
Head Office support costs.
Brewing Retail
and Pubs Tenanted
Brands and Hotels Pubs Unallocated Total
52 weeks ended 26 June 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- ----------- -------- ----------- --------
Revenue 42,018 27,068 16,748 1,050 86,884
Other Income - 2,839 - - 2,839
--------------------------------------- -------- ----------- -------- ----------- --------
Underlying operating (loss)/profit (1,287) 983 2,343 (6,279) (4,240)
Items excluded from underlying
results - (4,816) (562) (929) (6,307)
--------------------------------------- -------- ----------- -------- ----------- --------
Segmental operating (loss)/profit (1,287) (3,833) 1,781 (7,208) (10,547)
Net underlying finance costs (5,817)
Finance costs excluded from underlying
results (471)
Fair value movements on ineffective
element of cash flow hedges 115
Profit on disposal of property 221
Investment property fair value
movements 87
--------------------------------------- -------- ----------- -------- ----------- --------
Loss before taxation (16,412)
--------------------------------------- -------- ----------- -------- ----------- --------
Brewing Retail
and Pubs Tenanted
Brands and Hotels Pubs Unallocated Total
52 weeks ended 26 June 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ----------- -------- ----------- --------
Other segment information
Capital expenditure - tangible
and intangible assets 779 1,494 847 123 3,243
Depreciation and amortisation pre
IFRS 16 1,662 3,280 2,698 386 8,026
Depreciation and amortisation 1,752 4,629 4,248 481 11,110
Impairment of property, plant and
equipment, goodwill and assets
held for sale - 3,407 352 331 4,090
Impairment of right-of-use assets - 1,409 210 - 1,619
Underlying segmental EBITDA pre
IFRS 16 449 2,855 5,150 (5,732) 2,722
Underlying segmental EBITDA 546 6,184 6,616 (5,636) 7,710
Number of pubs - 65 235 10 310
---------------------------------- -------- ----------- -------- ----------- --------
Geographical information
An analysis of the Group's revenue by geographical market is set
out below:
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
------------------ -------- --------
Revenue
UK 149,011 84,606
Rest of the World 2,527 2,278
------------------ -------- --------
151,538 86,884
------------------ -------- --------
2 Revenue
An analysis of the Group's revenue by category is as
follows:
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
---------------------------- -------- --------
Sale of goods and services1 142,296 83,707
Rental income 9,242 3,177
---------------------------- -------- --------
Revenue 151,538 86,884
---------------------------- -------- --------
1. Revenue in the prior year includes GBP609,000 received from
the Government under the Eat Out to Help Out scheme.
3 Non-GAAP reporting measures
Certain items recognised in reported profit or loss before tax
can vary significantly from year to year and therefore create
volatility in reported earnings which does not reflect the
underlying performance of the Group. The Directors believe that
"underlying operating profit", "underlying profit before tax",
"underlying basic earnings per share", "underlying earnings before
interest, tax, depreciation, and amortisation" as presented provide
a clear and consistent presentation of the underlying performance
of the ongoing business for shareholders. Underlying profit is not
defined by IFRS and therefore may not be directly comparable with
the "adjusted" profit measures of other companies. The adjusted
items are:
-- profit or loss on disposal of properties;
-- investment property fair value movements;
-- separately disclosed operating and finance charges which are
either material or infrequent in nature and do not relate to the
underlying performance;
-- fair value movements on financial instruments charged to profit and loss; and
-- taxation impacts of the above (see note 4).
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Underlying EBITDA 23,428 7,710
Depreciation and amortisation (10,480) (11,110)
Free trade loan discounts (2) -
Loss on sale of assets (excluding property) (53) (840)
---------------------------------------------------------- -------- --------
Underlying operating profit/(loss) 12,893 (4,240)
---------------------------------------------------------- -------- --------
Net underlying finance costs pre IFRS 16 (4,355) (4,532)
---------------------------------------------------------- -------- --------
Net underlying finance costs (5,599) (5,817)
---------------------------------------------------------- -------- --------
Underlying profit/(loss) before taxation 7,294 (10,057)
Profit on disposal of properties 1,709 221
Investment property fair value movements 520 87
Separately disclosed operating charges:
Impairment of intangible assets, properties, right-of-use
assets and assets held for sale (2,863) (5,709)
Restructuring costs - (709)
Other operating charges excluded from underlying results 393 111
Separately disclosed finance costs:
Costs related to putting in place CLBILS loan - (201)
Costs relating to the agreement of covenant waivers with
our lenders (50) (270)
Costs relating to the transition from LIBOR to SONIA
for sterling debt instruments (33) -
Fair value movements on financial instruments charged
to profit and loss 397 115
---------------------------------------------------------- -------- --------
Profit/(loss) before taxation 7,367 (16,412)
---------------------------------------------------------- -------- --------
Separately disclosed operating charges
a) An impairment charge of GBP2,863,000 (2021: GBP5,709,000) in
relation to seven freehold properties and eight right-of-use
assets.
b) A recovery of GBP159,000 (2021: GBP111,000) in relation to
previously disclosed fraud carried out by an employee.
c) A provision of GBP498,000 was made in the year to 27 June
2020 in respect of potential charges relating to an inquiry opened
by HMRC regarding the provision of uniforms and training to
employees. The inquiry was closed by HMRC in March 2022 and the
excess provision of GBP443,000 has been released in the period.
d) Professional fees of GBP47,000 relating to two company
acquisitions which completed after the year end (see note 8).
e) Professional fees of GBP162,000 relating to the transition of
the pension scheme administration to an independent master
trust.
During the 52 weeks ended 26 June 2021, there was a one-off net
charge of GBP709,000 in respect of restructuring costs.
Separately disclosed finance costs
During the 52 weeks ended 25 June 2022, the Group incurred
GBP83,000 of legal and professional fees associated with agreeing
covenant waivers with our lenders, as well as fees associated with
the transition of existing debt instruments from LIBOR to SONIA.
These charges were offset by GBP397,000 credited in respect of the
ineffective portion of the movement in fair value interest rate
swaps.
The non-underlying finance charges for the 52 weeks ended 26
June 2021 comprise GBP471,000 of legal and professional fees
associated with agreeing revised covenants and agreeing covenant
waivers with our lenders, as well as fees associated with the
CLBILS loan. These charges were offset by GBP115,000 credited in
respect of the ineffective portion of the movement in fair value
interest rate swaps.
4 Taxation
a Tax on profit/(loss)
52 weeks ended 25 June 52 weeks ended 26 June
2022 2021
---------------------------------- ======================================== ========================================
Excluded Excluded
Underlying from underlying Total Underlying from underlying Total
Tax charged/(credited) to the results results statutory results results statutory
income statement GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Current income tax
Current tax on profit/(loss) for
the year - - - (37) - (37)
Adjustments for current tax on
prior periods - - - (110) 47 (63)
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Total current income tax credit - - - (147) 47 (100)
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Deferred income tax
Origination and reversal of timing
differences 1,462 (84) 1,378 (1,724) (784) (2,508)
Change in corporation tax rate - (33) (33) - 4,032 4,032
Adjustments for current tax on
prior periods - (258) (258) 3 (48) (45)
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Total deferred tax charge/(credit) 1,462 (375) 1,087 (1,721) 3,200 1,479
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Total tax charged/(credited)
to the income statement 1,462 (375) 1,087 (1,868) 3,247 1,379
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Tax charged to other comprehensive
income
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Deferred tax
Gains arising on cash flow hedges
in the period 493 305
Effect of increase in future rate
of corporation tax 68 (139)
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
Total tax charged to other
comprehensive
income 561 166
---------------------------------- ---------- ---------------- ---------- ---------- ---------------- ----------
b Reconciliation of the total tax charge
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Profit/(loss) before income tax 7,367 (16,412)
-------------------------------------------------------------- -------- --------
Tax on Group profit/(loss) at UK standard rate of corporation
tax of 19.0% (2021: 19.0%) 1,400 (3,118)
Expenses not deductible/(taxable) for tax purposes 151 (9)
Profit on sale of property less chargeable gains (173) 582
Effect of a change in tax rate (33) 4,032
Current and deferred tax over-provided in previous years (258) (108)
-------------------------------------------------------------- -------- --------
Total tax charged to the income statement 1,087 1,379
-------------------------------------------------------------- -------- --------
c Factors that may affect future tax charges
An increase in the future main corporation tax rate to 25% from
1 April 2023, from the previously enacted 19%, was announced in the
Budget on 3 March 2021, and substantively enacted on 24 May 2021.
Therefore deferred tax assets and liabilities that are expected to
reverse on or after 1 April 2023 have been calculated at the rate
of 25% as at the reporting date. A 1% reduction in the rate of
corporation tax from this level will decrease deferred tax balances
held by GBP600,000.
There is no expiry date on timing differences.
5 Dividends
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Declared and paid during the year
Interim dividend for 2022: 3.50p (2021: nil) per ordinary
share 520 -
---------------------------------------------------------- -------- --------
Dividends paid 520 -
---------------------------------------------------------- -------- --------
The Directors propose a final dividend of 15.00p (2021: nil) per
50p ordinary share totalling GBP2,222,000 (2021: nil) for the 52
weeks ended 25 June 2022. The dividend is subject to approval by
shareholders at the Annual General Meeting, to be held on 28
October 2022, and has not been included as a liability in these
financial statements as it has not yet been approved or paid.
Shares held by the Company (and not allocated to employees under
the Share Incentive Plan) are treated as cancelled when calculating
dividends and earnings per share.
6 Earnings per share
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Profit/(loss) attributable to equity shareholders 6,280 (17,791)
Items excluded from underlying results (448) 9,602
------------------------------------------------------------- -------- --------
Underlying profit/(loss) attributable to equity shareholders 5,832 (8,189)
------------------------------------------------------------- -------- --------
Number Number
------------------------------------------------------------- -------- --------
Weighted average number of shares in issue 14,784 14,760
Dilutive outstanding options 62 -
------------------------------------------------------------- -------- --------
Diluted weighted average share capital 14,846 14,760
------------------------------------------------------------- -------- --------
Earnings/(loss) per 50p ordinary share
------------------------------------------------------------- -------- --------
Basic 42.5p (120.5)p
Diluted 42.3p (120.5)p
Underlying basic 39.4p (55.5)p
------------------------------------------------------------- -------- --------
The basic earnings per share figure is calculated by dividing
the profit attributable to equity shareholders of the Parent
Company for the period by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share have been calculated on a similar
basis taking into account 62 (2021: nil) dilutive potential shares,
which excludes shares held by trusts in respect of employee
incentive plans and options. There were no dilutions in the
previous year due to the loss per share.
Underlying basic earnings per share are presented to eliminate
the effect of the underlying items and the tax attributable to
those items on basic and diluted earnings per share.
7 Notes to the STATEMENT OF Cash Flows
a Reconciliation of operating profit/(loss) to cash generated by
operations
52 weeks ended 25 June 52 weeks ended 26 June
2022 2021
------------------------------------ ====================================== ======================================
Excluded Excluded
Underlying from underlying Underlying from underlying
results results Total results results Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------------- -------- ---------- ---------------- --------
Operating profit/(loss) 12,893 (2,470) 10,423 (4,240) (6,307) (10,547)
Adjustment for:
Depreciation and amortisation 10,480 - 10,480 11,110 - 11,110
Impairment of property, plant
and equipment - 1,561 1,561 - 3,628 3,628
Impairment of intangible assets - 52 52 - 328 328
Impairment of right-of-use assets - 1,226 1,226 - 1,619 1,619
Impairment of assets held for
sale - 24 24 - 134 134
Share-based payments expense 183 - 183 428 - 428
(Increase)/decrease in inventories (747) - (747) 910 - 910
Increase in debtors and prepayments (2,242) - (2,242) (5,279) - (5,279)
Increase/(decrease) in creditors
and accruals 712 (374) 338 (870) (678) (1,548)
Loss on sale of assets (excluding
property) 53 - 53 840 - 840
Interest received - - - 3 - 3
Income tax received - - - 195 - 195
Fair value movements on financial
assets (210) - (210) 5 - 5
------------------------------------ ---------- ---------------- -------- ---------- ---------------- --------
Net cash inflow/(outflow) from
operating activities 21,122 19 21,141 3,102 (1,276) 1,826
------------------------------------ ---------- ---------------- -------- ---------- ---------------- --------
b Reconciliation of movement in cash to movement in net debt
52 weeks 52 weeks
ended ended
25 June 26 June
2022 2021
Group and Company GBP'000 GBP'000
----------------------------------------------- --------- ---------
Opening cash and overdraft 5,560 9,807
Closing cash and overdraft 5,579 5,560
----------------------------------------------- --------- ---------
Movement in cash in the period 19 (4,247)
Cash from increase in bank loans - (2,000)
Cash used to repay bank loans 15,600 -
Movement in loan issue costs (105) (103)
----------------------------------------------- --------- ---------
Movement in net debt resulting from cash flows 15,514 (6,350)
Net debt at beginning of the period (90,805) (84,455)
----------------------------------------------- --------- ---------
Net debt (75,291) (90,805)
----------------------------------------------- --------- ---------
Current lease liability (2,780) (5,100)
Non-current lease liability (53,106) (53,226)
----------------------------------------------- --------- ---------
Statutory net debt (131,177) (149,131)
----------------------------------------------- --------- ---------
c Analysis of net debt
Reclassification
of long-term Repayment
June 2021 Cash flow loans of loans Non-cash June 2022
Group and Company 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ---------------- --------- -------- ---------
Cash and cash equivalents 5,560 19 - - - 5,579
Debt due in less than one
year (1,600) - (1,600) 1,600 - (1,600)
Debt due after more than
one year (94,765) - 1,600 14,000 (105) (79,270)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Net debt (90,805) 19 - 15,600 (105) (75,291)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Lease liabilities (58,326) 4,220 - - (1,780) (55,886)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Statutory net debt (149,131) 4,239 - 15,600 (1,885) (131,177)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Reclassification
of long-term
June 2020 Cash flow loans New loans Non-cash June 2021
Group and Company 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ---------------- --------- -------- ---------
Cash and cash equivalents 9,807 (4,247) - - - 5,560
Debt due in less than one
year (94,262) - 92,662 - - (1,600)
Debt due after more than
one year - - (92,662) (2,000) (103) (94,765)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Net debt (84,455) (4,247) - (2,000) (103) (90,805)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Lease liabilities (55,860) 3,930 - - (6,396) (58,326)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Statutory net debt (140,315) (317) - (2,000) (6,499) (149,131)
-------------------------- --------- --------- ---------------- --------- -------- ---------
Non-cash movements in lease liabilities comprises lease
additions and modifications of GBP699,000 (2021: GBP5,844,000) and
interest of GBP1,245,000 (2021: GBP1,285,000), less waivers of
GBP164,000 (2021: GBP733,000).
8 Events after the reporting period
After the reporting period, the Company acquired two freehold
pubs in Essex from East Anglia Pub Co Limited. These pubs have been
transferred to the Retail estate.
The Company has also acquired East Anglia Pub Corporation
Limited which operated one pub in Essex, and Urban Reef Restaurant
Limited which operated one pub in Bournemouth. Both of these pubs
have been transferred to the Retail estate.
The total investment in these acquisitions was GBP6.7m.
After the reporting period, the Company has also taken an
additional private placement of loan notes for GBP20,000,000 with
BAE Systems Pension Funds Investment Management Ltd (BAE Pension
Fund). BAE Pension Fund will receive loan notes at a fixed interest
rate of 5.47% for 10 years. This is in addition to the 20-year
private placement of GBP35,000,000 arranged with BAE Pension Fund
in October 2018 at a fixed rate of interest of 3.99%.
9 ACCOUNTS
The financial information for the period ended 25 June 2022 and
the period ended 26 June 2021 does not constitute the Company's
statutory accounts for those years.
Statutory accounts for the period ended 26 June 2021 have been
delivered to the Registrar of Companies. The statutory accounts for
the period ended 25 June 2022 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
The auditor's report on the statutory accounts for 25 June 2022
is unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under s498(2) or s498(3)
of the Companies Act 2006. The auditor's report on the statutory
accounts for 26 June 2021 was unqualified, and did not contain a
statement under s498(2) ors498(3) of the Companies Act 2006.
[1] Underlying profit/(loss) less attributable taxation divided
by the weighted average number of ordinary shares in issue during
the period. The numbers of shares in issue excludes those held by
the Company and not allocated to employees under the Share
Incentive Plan which are treated as cancelled
[2] Underlying profit/(loss) before tax pre net finance costs,
depreciation, amortisation, profit or loss on sale of fixed assets
excluding property and free trade loan discounts
[3] Net assets at the reporting date divided by the number of
shares in issue being 14,857,500 50p shares
[4] Net debt excluding lease liabilities comprises cash, bank
overdrafts, bank and other loans less unamortised loan fees
[5] Retail like-for-like sales includes revenue from the sale of
drink, food and accommodation but excludes machine income.
Like-for-like sales performance is calculated against a comparable
52 week period in the prior year for pubs that were in the estate
in the same period within both years
[6] 2019 is the 52 weeks to the 29 June 2019
[7] Tenanted income calculated to exclude from both years those
pubs which have not been in the estate throughout the two years.
The principal exclusions are pubs purchased or sold, pubs which
have closed, and pubs transferred to or from our retail business.
Income is calculated against a comparable 52 week period in the
prior year for pubs that were trading in both 52-week periods
[8] Shepherd Neame branded, licensed, foreign, customer
own-label and contract beer and cider sales volumes
[9] Shepherd Neame branded, licensed, customer own-label and
contract beer and cider sales volumes
[10] The periods referred to for financial year 2020 are the
comparative month(s) of July, August & September 2019 which
were during the financial year 52 weeks to 27 June 2020
[11] The periods referred to for financial year 2022 are the
comparative month(s) of July, August & September 2021 which
were during the financial year 52 weeks to 25 June 2022
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END
NEXKZGZLMNVGZZZ
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September 28, 2022 02:02 ET (06:02 GMT)
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