TIDMSHEP
RNS Number : 7720T
Shepherd Neame Limited
22 March 2023
Shepherd Neame
Interim results for the 26 weeks to 24 December 2022
Shepherd Neame, Britain's Oldest Brewer and owner and operator
of 301 high quality pubs in Kent and the Southeast, today announces
results for the 26 weeks ended 24 December 2022.
The period under review has seen continuing strong consumer
demand, but is dominated by significant inflationary pressures
which have impacted margins, with Brewing and Brands remaining
challenging. Our investment programme has now resumed , with many
projects that are essential for the future development of the
Company underway.
This time last year, the Board restored the dividend for the
first time post-pandemic and have increased it again.
Record revenue in H1, in spite of economic headwinds
-- Revenue was GBP85.3m (H1 2022: GBP78.7m; H1 20201 restated:
GBP79.0m), an increase of +8.4% vs H1 2022
-- Statutory profit before tax was GBP5.5m (H1 2022: GBP5.4m; H1
2020 (1) restated: GBP5.3m), an increase of +1.8% vs H1 2022
-- Underlying profit before tax2 was GBP3.5m (H1 2022: GBP3.0m;
H1 2020 (1) restated: GBP6.0m), an increase of +15.5% vs H1
2022
-- Cashflow has remained robust. Net debt, excluding lease
liabilities3, is level at GBP82.8m (H1 2022: GBP82.4m; H1 2020 (1)
restated: GBP85.4m)
-- Basic earnings per share was 28.9p (H1 2022: 28.9p; H1 2020 (1) restated: 27.9p)
-- Underlying basic earnings per share4 was 18.7p (H1 2022:
15.9p; H1 2020 (1) restated: 32.4p)
-- Net assets per share5 were GBP12.12 (H1 2022: GBP11.76; H1 2020 (1) restated: GBP14.06)
-- Interim dividend of 4.00p per share declared (H1 2022: 3.50p;
H1 2020 (1) restated: nil), an increase of +14.3% vs H1 2022
Operational performance
Performance Performance
H1 2023 vs H1 H1 2023 vs H1
2022 2020 (1)
Retail like-for-like
sales 6 +11.9% +1.2%
--------------- ---------------
Like-for-like tenanted
income7 +7.1% +1.5%
--------------- ---------------
Total beer volume8 -0.9% +4.7%
--------------- ---------------
Own beer volume9 +12.7% +8.2%
--------------- ---------------
-- Retail Pubs and Hotels (67 pubs) revenue grew by +18.0%
-- Total retail sales up +18.0% to GBP36.9m (H1 2022: GBP31.3m)
-- Retail like-for-like sales (6) were +11.9% vs H1 2022 and +1.2% vs H1 2020 (1)
-- Retail like-for-like sales (6) inside the M25 were up +39.1%,
outside the M25 +3.4% vs H1 2022, reflecting increased footfall in
London as people return to their offices
-- Retail sales growth mainly driven by drink sales with
like-for-like sales up +27.4% vs H1 2022
-- Food like-for-like sales reduced by -3.3% vs H1 2022
-- Accommodation like-for-like sales down -8.6% vs H1 2022.
RevPAR was up +2.6% vs H1 2022 at GBP90
-- Divisional operating profit was up +2.4% at GBP4.7m (H1 2022: GBP4.6m)
-- Tenanted Pubs (229 pubs) remained resilient during the period
-- Like-for-like tenanted pub income(7) was +7.1% vs H1 2022 and +1.5% vs H1 2020 (1)
-- Divisional revenue was GBP17.4m (H1 2022: GBP16.4m) and
operating profit was GBP6.9m (H1 2022: GBP5.6m)
-- Brewing and Brands: sales maintained, but margins impacted by
exceptional inflationary pressures
-- Total beer volumes(8) were down -0.9% vs H1 2022 and up +4.7% vs H1 2020 (1)
-- Own beer volumes(9) were up +12.7% vs H1 2022 and +8.2% vs H1 2020 (1)
-- Divisional revenue maintained at GBP30.3m (H1 2022:
GBP30.6m), with an operating loss of GBP0.4m (H1 2022: GBP0.0m)
New long term financing put in place
-- At the end of February 2023, we had total committed
facilities of GBP114.3m and headroom of GBP32.8m. 69% of our
committed facilities are at a fixed rate, with all debt medium and
long term
Current trading and outlook
-- For the 12 weeks to 18 March, retail like-for-like sales was
+12.8% vs 202210 and +13.0% vs 202011
-- Like-for-like tenanted pub income for the nine weeks to 25
February was +4.9% vs 2022(10) and +1.7% vs 2020(11)
-- Total beer volume for the 12 weeks to 18 March was -5.5% vs
2022(10) and -6.5% vs 2020(11) . Own beer volume was -3.0% vs
2022(10) and -1.8% vs 2020(11)
-- Fundamentals of the business remain strong and the business
is in good shape. Demand is encouraging but we expect further cost
inflation in the second half and into next financial year.
-- Measures announced in the budget to reduce alcohol duty on beer in pubs, are most welcome.
Jonathan Neame, CEO of Shepherd Neame, said:
"We have an excellent pub estate with considerable potential,
well established brands, a loyal customer base, and a high profile
within the individual communities we serve. All these factors will
stand us in good stead as the cost of living crisis eases and the
economy returns to growth."
22 March 2023
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 301 pubs, of which
229 were tenanted or leased, 67 managed and five 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 Spitfire, Bishops Finger, Whitstable Bay and
Bear Island.
The Company also has a partnership with Boon Rawd Brewery
Company for Singha beer, Thailand's original premium beer.
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
INTERIM STATEMENT
Overview
The Company has made further good progress in this period, in
spite of significant economic headwinds.
Our revenue is now at record level for the first half of the
year. Net debt, excluding lease liabilities, is level year on year,
even after investment in four new pubs, and the interim dividend is
increased, albeit not yet returned to pre-pandemic levels.
This is our first half-year period since 2019 without any
COVID-19 related restrictions. Consumer spending overall has
remained strong. A long hot summer and a mild autumn helped our
coastal sites and there has been a progressive return to offices
within the City of London. Christmas trading was generally good,
although we did not see quite as many large parties as we would
have expected pre-pandemic, and the train strikes had a significant
impact on what would have been the busiest week.
Profit levels are not yet back to pre-pandemic levels. Overall,
our tenanted pubs have been strong, retail sales most encouraging,
but with margins impacted by high costs, and brewing and brands
remains challenging.
The inflationary surge in the wider economy has impacted our
cost base in many areas, with huge increases in food, energy,
glass, brewing raw materials, packaging waste and logistics. The
root cause of these increases is the higher cost of energy and
energy-intensive products. Inflation in the sector has generally
been significantly higher than the headline rate of inflation.
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.
The supply chain itself has become slightly more resilient and
we have been able to source raw materials at all times. We have
contracts in place in the brewery and retail pubs that protect us
from further inflation from direct utility purchases, during the
forthcoming year.
This period compares with the prior year during which we
benefited from lower rates of VAT, set at 12.5% until March 2022.
We value that benefit at GBP1.7m in the first half of last year. We
also received business and furlough grants of GBP421k during that
period. All Government support has now ceased except for the Energy
Bills Relief Scheme and ongoing support for business rates, for
some of our tenanted pubs.
We are optimistic that we are past peak inflation, and so we
expect to see many, but not all, of our raw material and input
costs start to stabilise in the second half. We will, however, see
a further step-up in wage costs, as the National Minimum Wage
increases by 9.7% in April. We pay ahead of the National Minimum
Wage, but this increase will have a consequential impact across all
employee grades.
Price increases have been necessary, and the impact of these
will come through in the second half. We are mindful that our
customers face similar cost pressures in their own businesses and
consumers can only afford so much at a time when mortgages and
energy costs are rising.
During the pandemic, we restrained investment and projects, but
these have now resumed. We are re-commencing many projects that are
essential for the future development of the Company.
We have invested GBP0.5m year to date in these projects and will
carry out further projects in the second half. We have built up our
People Team to support learning and development to develop our own
talent, improve retention levels and focus on customer service. We
have refocused our food team to support the introduction of a menu
refresh across the business in the second half; we have re-designed
our pub websites; we have strengthened our property and health and
safety teams and restored our IT team to full complement.
Financial Results
Revenue was GBP85.3m (H1 2022: GBP78.7m; H1 2020(1): GBP79.0m),
an increase of +8.4% on the prior year.
Underlying operating profit was GBP6.3m (H1 2022: GBP5.9m; H1
2020(1): GBP8.5m), an increase of +5.6%.
Statutory profit before tax was GBP5.5m (H1 2022: GBP5.4m; H1
2020(1): GBP5.3m), an increase of +1.8%.
Underlying profit before tax was GBP3.5m (H1 2022: GBP3.0m; H1
2020(1): GBP6.0m), an increase of +15.5%.
Basic earnings per share was 28.9p (H1 2022: 28.9p; H1 2020(1):
27.9p).
Underlying basic earnings per share was 18.7p (H1 2022: 15.9p;
H1 2020(1): 32.4p).
Net assets per share were GBP12.12 (H1 2022: GBP11.76; H1
2020(1): GBP14.06).
Dividend
This time last year the Board restored the dividend for the
first time post-pandemic. We feel sufficiently confident to
increase it again in spite of the economic headwinds.
The Board is declaring an interim dividend of 4.00p per share
(H1 2022: 3.50p; H1 2020(1): nil), an increase of +14.3%.
The dividend will be paid on 17 April 2023 to those shareholders
on the register as at 31 March 2023.
Capital Expenditure, Net Debt and Cash Flow
Cashflow has remained robust. During the period, we have
achieved underlying EBITDA (earnings before interest, tax,
depreciation and amortisation) of GBP11.4m (H1 2022: GBP11.3m; H1
2020(1): GBP14.4m), an increase of +0.5%.
Statutory net debt fell to GBP138.9m from GBP139.8m in the prior
year. Net debt, excluding lease liabilities, was level at GBP82.8m
(H1 2022: GBP82.4m; H1 2020(1): GBP85.4m).
The robust cash and net debt position have supported an increase
in capital expenditure, as we restore more normalised levels of
investment. In the first half, we invested GBP10.7m (H1 2022:
GBP2.7m; H1 2020(1): GBP8.1m). The larger part of this investment
was the acquisition of four retail pubs in July 2022, as previously
announced, for GBP6.7m.
Financing
The Company has put in place a new long-term financing facility.
This provides certainty of funds to the Company, a reduction in
exposure to interest rate rises and an improved debt maturity
profile.
Specifically, we now have a four-year revolving credit facility
of GBP40m that matures in 2026, and a second private placement
tranche of GBP20m with BAE Systems Pension Funds Investment
Management Ltd at a fixed interest rate of 5.47% for 10 years. This
is in addition to the 20 year private placement arranged with the
same party in October 2018 at a fixed interest rate of 3.99%. The
new facilities sit alongside the existing term loan which remains
in place until December 2026, with the repayment of GBP1.6m payable
on 31 December each year.
At the end of February, we had total committed facilities of
GBP114.3m. 69% of our committed facilities are at a fixed rate,
with all debt medium and long term. This provides a financing
platform from which to take advantage of any opportunities that may
arise in the next few years.
Tenanted and Retail Pub Operations
As at 24 December 2022, we owned 301 pubs (June 2022: 300), of
which 229 (June 2022: 231) are tenanted or leased, 67 (June 2022:
63) are retail pubs and five (June 2022: six) operated on a
free-of-tie basis as investment properties. 85% of our pubs are
owned freehold.
During the period we have transferred one tenanted pub to
retail, and one retail pub to investment property. We have sold
three pubs and have acquired four. These disposals have realised
GBP0.9m of net proceeds (H1 2022: GBP8.0m).
Since the half year, we have recommenced major capital projects.
The Crown at Chislehurst is underway and will complete by Easter,
and the Tom Cribb near Haymarket will commence at the year end. We
plan to undertake a transformational development at the Duke of
Cumberland in Whitstable in the summer. We have carried out minor
schemes at the Jamaica Winehouse, London, the Minnis Bay,
Birchington and the garden at the Botany Bay, Kingsgate.
We are building a pipeline of substantial projects to carry out
over the next three years as we transfer some pubs from tenancy and
look to exploit the full potential of our estate, in line with our
medium term goal to have 100 retail sites. In the second half we
will transfer five pubs from tenanted to retail. We expect to incur
transitional costs of GBP0.5m as these sites await transformational
development.
RETAIL PUBS AND HOTELS
For the 26 weeks to 24 December 2022, our retail pubs achieved
encouraging like-for-like sales growth on the prior year and on
pre-pandemic levels, at +11.9% vs H1 2022 and +1.2% vs H1 2020(1).
All individual months were in growth on the prior year, with the
strongest growth in July and December, since these periods were
affected by COVID-19 restrictions in the prior year. However,
December was below expectations as we lost an estimate of GBP250k
of sales due to the rail strikes.
Within the M25, like-for-like sales are +39.1% vs H1 2022 and
-5.6% vs H1 2020(1). Outside the M25, like-for-like sales are +3.4%
vs H1 2022 and +4.4% vs H1 2020(1).
This growth has been mainly driven by drinks sales, with
like-for-like sales +27.4% vs H1 2022, driven by the recovery of
our London pubs as people return to their offices. Like-for-like
food sales were -3.3% vs H1 2022 and like-for-like accommodation
sales -8.6% vs H1 2022. Food and accommodation benefited from VAT
reduction in the prior year to 12.5%, which has now normalised to
20%.
Whilst revenue on food and drink is up on a like-for-like basis
on pre-pandemic levels, the volume of meals and pints sold remains
below. Rooms sold are +6.7% up.
At 24 December 2022, we operated 232 rooms in our retail estate,
14 rooms more than at the year-end. Occupancy has been strong in
this half at 82% (H1 2022: 77%) and RevPAR excellent at GBP90 (H1
2022: GBP84). The current economic conditions indicate that 2023
will be another staycation year.
Divisional revenue in Retail Pubs was up +18.0% at GBP36.9m (H1
2022: GBP31.3m), divisional operating profit was up +2.4% at
GBP4.7m (H1 2022: 4.6m).
Tenanted Pubs
Trade in our tenanted pubs has remained resilient during this
period. As in our retail pubs, most have benefited from the warm
summer weather, and have seen demand remain robust during the
autumn. Some pubs however have experienced material increases in
their energy bills, depending on the specific terms of their
utilities contract. The Government Energy Bills Relief Scheme has
been most welcome but is currently due to expire at the end of
March. Unless the lower market rate for energy starts to feed
through to customers, this may cause a substantial challenge for
individual licensees. Measures announced in the budget to reduce
alcohol duty on beer in pubs are most welcome.
Like-for-like net pub income was +7.1% vs H1 2022 and +1.5% vs
H1 2020(1).
Divisional revenue in Tenanted Pubs was GBP17.4m (H1 2022:
GBP16.4m) and divisional operating profit was GBP6.9m (H1 2022:
GBP5.6m).
Brewing and Brands
Total beer volume was -0.9% vs H1 2022 and +4.7% vs H1 2020(1).
Own beer volume was +12.7% vs H1 2022 and +8.2% vs H1 2020(1).
We have all seen higher inflation in the last year, but the
degree of inflation experienced in this area is quite exceptional.
Inflation has been particularly acute in glass, CO , packaging
waste and logistics. Our customers have been generally supportive
but the price increases we have been able to pass on so far are
short of these particular cost increases. As such we will need to
pass on further price increases in the coming months, whilst
exploring every avenue to contain cost inflation.
Divisional revenue in Brewing and Brands was GBP30.3m (H1 2022:
GBP30.6m) and divisional operating loss was (GBP0.4m) (H1 2022:
GBP0.0m).
Investment Property
As at December 2022, the Company owned investment property
valued at GBP6.9m (2022: GBP6.2m). We have sold two properties
during the period (2022: five). We continue to promote sites in the
local area for potential development. We remain confident one or
two of these schemes will be approved in the near term, but recent
changes in Government policy make others less likely.
Outlook and Current Trading
Consumer spending has remained good throughout this period - and
better than many had expected - albeit the underlying volumes of
food and drink are still down on pre-pandemic levels. Costs are up
in all channels, some significantly above the prevailing rate of
RPI, with further costs to be absorbed.
The extraordinary rises in costs in the brewing business, in
particular, are likely to impact margins in the short term. The
second half will present further challenges to our cost base, but
it seems likely that the specific energy and Ukraine-war related
factors that have driven this inflation will start to abate in the
next financial year. The consumer cost of living squeeze may also
start to ease as wage increases close the gap.
For the 12 weeks to 18 March, retail like-for-like sales was
+12.8% vs 2022 and +13.0% vs 2020(2). Like-for-like tenanted pub
income for the nine weeks to 25 February was + 4.9% vs 2022 and
+1.7% vs 2020(2). Total beer volume for the 12 weeks to 18 March
was -5.5% vs 2022 and -6.5% vs 2020(2). Own beer volume was -3.05%
vs 2022 and -1.8% vs 2020(2).
This has been a tough time for anyone in the hospitality sector,
with one crisis rolling in to the next. The events of the last few
years demonstrate how unpredictable such things can be, and we
remain flexible and agile to respond to further events.
The fundamentals, though, for the business remain good. With a
strong balance sheet, and a cash generative business, we are now
focused on maximising growth potential through delivering our
investment and project plans.
We have an excellent pub estate with considerable potential,
well established brands, a loyal customer base, and a high profile
within the individual communities we serve.
All these factors will stand us in good stead as the cost of
living crisis eases and the economy returns to growth.
Jonathan Neame
Chief Executive
1. H1 2020 is the first half of the financial period of the 52
weeks to the 27 June 2020. The first half equated to the 26 weeks
ended 28 December 2019.
2. The periods referred to are the comparative periods during
the financial years 52 weeks to 27 June 2020.
Group income statement
For the 26 weeks ended 24 December 2022
Audited
52 weeks
Unaudited Unaudited ended
26 weeks ended 24 26 weeks ended 25 25 June
December 2022 December 2021 2022
------------------------------------- ------------------------------------------ ---------
Items Items
excluded excluded
from from
Underlying underlying Total Underlying underlying Total Total
results results statutory results results statutory statutory
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---- ---------- ------------ ----------- -------------- ------------- ----------- ---------
Revenue 3 85,330 - 85,330 78,729 - 78,729 151,538
Other income 3 - - - 121 - 121 383
Operating charges (79,048) (798) (79,846) (72,903) 451 (72,452) (141,498)
---------------------- ---- ---------- ------- ------------ ------------- --------- ----------- ------------------
2,
Operating profit 3 6,282 (798) 5,484 5,947 451 6,398 10,423
2,
Net finance costs 4 (2,779) (214) (2,993) (2,915) - (2,915) (5,682)
Fair value movements
on financial
instruments
charged to profit and 2,
loss 4 - 195 195 - 95 95 397
---------------------- ---- ---------- ------- ------------ ------------- --------- ----------- ------------------
Total net finance
costs (2,779) (19) (2,798) (2,915) 95 (2,820) (5,285)
Profit on disposal of
property 2 - 2,639 2,639 - 1,487 1,487 1,709
Investment property
fair
value movements 2 - 136 136 - 300 300 520
---------------------- ---- ---------- ------- ------------ ------------- --------- ----------- ------------------
Profit before taxation 3,503 1,958 5,461 3,032 2,333 5,365 7,367
Taxation 5 (746) (455) (1,201) (687) (406) (1,093) (1,087)
---------------------- ---- ---------- ------- ------------ ------------- --------- ----------- ------------------
Profit after taxation 2,757 1,503 4,260 2,345 1,927 4,272 6,280
---------------------- ---- ---------- ------- ------------ ------------- --------- ----------- ------------------
Earnings per 50p
ordinary
share 7
Basic 28.9p 28.9p 42.5p
Diluted 28.7p 28.5p 42.3p
---------------------- ---- ---------- ------- ------------ ------- ------------- --------- ------------------
All results are derived from continuing activities.
Group statement of comprehensive income
For the 26 weeks ended 24 December 2022
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
24 December 25 December 25 June
2022 2021 2022
Note GBP'000 GBP'000 GBP'000
Profit after taxation 4,260 4,272 6,280
Items that may be reclassified subsequently
to profit or loss:
Gains arising on cash flow hedges
during the period 1,389 1,036 2,596
Income tax relating to these items 5 (318) (197) (561)
-------------------------------------------- -------- ----------- ------------ ---------
Other comprehensive gains 1,071 839 2,035
-------------------------------------------- -------- ----------- ------------ ---------
Total comprehensive income 5,331 5,111 8,315
-------------------------------------------- -------- ----------- ------------ ---------
Group statement of financial position
As at 24 December 2022
Unaudited Unaudited Audited
24 December 25 December 25 June
2022 2021 2022
Note GBP'000 GBP'000 GBP'000
-------------------------------------- ---- ------------ ------------ ---------
Non-current assets
Goodwill and intangible assets 2,320 319 375
Property, plant and equipment 8 277,590 277,694 274,651
Investment properties 6,887 6,243 6,716
Other non-current assets - 2 -
Right-of-use assets 10 45,850 46,570 44,235
Finance lease receivables 2,450 - -
-------------------------------------- ---- ------------ ------------ ---------
335,097 330,828 325,977
-------------------------------------- ---- ------------ ------------ ---------
Current assets
Inventories 8,042 9,068 8,067
Trade and other receivables 18,358 17,795 17,685
Cash and cash equivalents 691 4,041 5,579
Assets held for sale 1,341 1,359 1,099
Finance lease receivables 65 - -
-------------------------------------- ---- ------------ ------------ ---------
28,497 32,263 32,430
-------------------------------------- ---- ------------ ------------ ---------
Current liabilities
Trade and other payables (27,132) (25,846) (27,222)
Borrowings 11 (1,600) (1,600) (1,600)
Lease liabilities 10 (1,976) (4,379) (2,780)
-------------------------------------- ---- ------------ ------------ ---------
(30,708) (31,825) (31,602)
-------------------------------------- ---- ------------ ------------ ---------
Net current (liabilities)/assets (2,211) 438 828
-------------------------------------- ---- ------------ ------------ ---------
Total assets less current liabilities 332,886 331,266 326,805
-------------------------------------- ---- ------------ ------------ ---------
Non-current liabilities
Lease liabilities 10 (54,155) (53,021) (53,106)
Borrowings 11 (81,871) (84,818) (79,270)
Derivative financial instruments (656) (4,280) (2,353)
Provisions - (55) -
Deferred tax liabilities (16,173) (14,390) (14,749)
-------------------------------------- ---- ------------ ------------ ---------
(152,855) (156,564) (149,478)
-------------------------------------- ---- ------------ ------------ ---------
Net assets 180,031 174,702 177,327
-------------------------------------- ---- ------------ ------------ ---------
Capital and reserves
Share capital 7,429 7,429 7,429
Share premium account 1,099 1,099 1,099
Revaluation reserve 31 31 31
Own shares (1,045) (745) (660)
Hedging reserve (418) (2,685) (1,489)
Retained earnings 172,935 169,573 170,917
-------------------------------------- ---- ------------ ------------ ---------
Total equity 180,031 174,702 177,327
-------------------------------------- ---- ------------ ------------ ---------
Group statement of changes in equity
For the 26 weeks ended 24 December 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 25 June
2022 7,429 1,099 31 (660) (1,489) 170,917 177,327
Profit for the period - - - - - 4,260 4,260
Gains arising on cash
flow hedges during the
period - - - - 1,389 - 1,389
Tax relating to components
of other comprehensive
income 5 - - - - (318) - (318)
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Total comprehensive
income - - - - 1,071 4,260 5,331
Ordinary dividends paid - - - - - (2,227) (2,227)
Accrued share-based
payments - - - - - 206 206
Purchase of own shares - - - (610) - - (610)
Distribution of own
shares - - - 41 - (37) 4
Unconditionally vested
share awards - - - 184 - (184) -
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 24 December
2022 7,429 1,099 31 (1,045) (418) 172,935 180,031
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 26 June
2021 7,429 1,099 31 (1,010) (3,524) 165,322 169,347
Profit for the period - - - - - 4,272 4,272
Gains arising on cash
flow hedges during the
period - - - - 1,036 - 1,036
Tax relating to components
of other comprehensive
income 5 - - - - (197) - (197)
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Total comprehensive
income - - - - 839 4,272 5,111
Accrued share-based
payments - - - - - 243 243
Distribution of own
shares - - - 16 - (15) 1
Unconditionally vested
share awards - - - 249 - (249) -
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Balance at 25 December
2021 7,429 1,099 31 (745) (2,685) 169,573 174,702
--------------------------- ---- -------- -------- ----------- -------- -------- --------- --------
Group statement of cash flows
For the 26 weeks ended 24 December 2022
Audited
Unaudited Unaudited 52 weeks
26 weeks ended 26 weeks ended ended
24 December 25 December 25 June
2022 2021 2022
------------------------------------- ---- ----------------- ------------------ ------------------
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating activities 12a
Cash generated from operations 8,822 7,034 21,141
Income taxes paid (114) - -
-------- -------- --------
Net cash flow generated by
operating activities 8,708 7,034 21,141
Cash flows from investing activities
Proceeds from disposal of property,
plant and equipment 20 5,746 5,792
Proceeds from disposal of investment
property - 1 1
Proceeds from disposal of assets
held for sale 869 2,284 3,292
Purchases of property, plant,
equipment and lease premiums (5,446) (2,670) (5,304)
Purchase of intangible assets - - (129)
Customer loan repayments 1 2 -
Acquisition of subsidiaries 9 (5,221) - -
Cash acquired on acquisition 9 766 - -
-------- -------- --------
Net cash flow (absorbed)/generated
by investing activities (9,011) 5,363 3,652
Cash flows from financing activities
Dividends paid 6 (2,227) - (520)
Interest paid (2,073) (2,285) (4,436)
Payments of principal portion
of lease liabilities 10 (2,081) (1,632) (4,220)
Proceeds from borrowings 12c 3,000 - -
Repayment of borrowings 12c - (10,000) (15,600)
Issue costs of new long term
loans 12c (598) - -
Purchase of own shares (610) - -
Share option proceeds 4 1 2
Net cash flow used in financing
activities (4,585) (13,916) (24,774)
------------------------------------- ---- -------- ------- -------- -------- -------- --------
Net (decrease)/increase in
cash and cash equivalents (4,888) (1,519) 19
Cash and cash equivalents at
beginning of the period 5,579 5,560 5,560
------------------------------------- ---- -------- ------- -------- -------- -------- --------
Cash and cash equivalents at
end of the period 691 4,041 5,579
------------------------------------- ---- -------- ------- -------- -------- -------- --------
Notes to the financial statements
24 December 2022
1 Accounts
General information and basis of preparation
The consolidated interim financial statements, which are
unaudited, do not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. Statutory accounts for the
52 weeks ended 25 June 2022, upon which the auditors issued an
unqualified opinion and did not make any statement under section
498 of the Companies Act 2006, have been filed with the Registrar
of Companies. The financial information comprises the results of
Shepherd Neame Limited (the Company) and its subsidiaries (the
Group).
The consolidated interim financial statements have been prepared
in accordance with international accounting standards, in
conformity with the requirements of the Companies Act 2006
(UK-adopted International Accounting Standards). These standards
are applied from 26 June 2022, with no changes to the accounting
policies set out in the statutory accounts of Shepherd Neame
Limited for the period ended 25 June 2022, except for those noted
below. The financial statements have not been prepared (and are not
required to be prepared) in accordance with IAS 34: 'Interim
Financial Reporting', with the exception of note 5, taxation, where
the tax charge for the half year to 24 December 2022 has been
calculated using an estimate of the full year effective tax rate,
in line with the principles of IAS 34. The accounting policies have
been applied consistently throughout the Group for the purposes of
preparation of this financial information.
The interim financial statements are presented in pounds
sterling and all values are shown in thousands of pounds (GBP'000)
rounded to the nearest thousand (GBP'000), unless otherwise
stated.
The financial information for the 52 weeks ended 25 June 2022 is
extracted from the statutory accounts of the Group for that
year.
New accounting standards and accounting policies
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual consolidated financial
statements for the 52 weeks ended 25 June 2022. The Group has not
early adopted any standard, interpretation or amendment that has
been issued but is not yet effective.
Amendments to accounting standards applied from 26 June 2022
were as follows:
Amendments to IAS 16 - Property, Plant and Equipment: Proceeds
before Intended Use;
Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a
Contract;
Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41).
The adoption of these amendments has not had a material impact
on the interim financial statements of the Group.
Going concern
The Board has adopted the going concern basis in preparing these
accounts. When assessing the ability of the Group to continue as a
going concern, the Board has considered the Group's financing
arrangements as well as other principal risks and uncertainties as
disclosed in the Group's latest Annual Report, namely the current
economic downturn and its impact on consumers, and the inflationary
cost pressures that the hospitality industry is currently
facing.
At 24 December 2022, the Group had a strong balance sheet with
85% of the estate being freehold properties. The Group had cash in
hand of GBP0.7m and has forecast cash inflows for the financial
years to June 2023 and June 2024. At 24 December 2022, the Group
had existing facilities of GBP115.9m. Net debt, excluding lease
liabilities, was GBP82.8m (H1 2022: GBP82.4m).
The Company put in place a new long term financing facility
during the period. This provides certainty of funds to the Company,
a reduction in exposure to interest rate rises and an improved debt
maturity profile (see note 11).
After due consideration of the matters set out above, the
Directors are satisfied that there is a reasonable expectation that
the Group has
adequate resources to enable its interim financial statements to
be presented on the basis of the Group being a going concern.
2 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;
-- operating and finance charges/credits 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 5).
26 weeks 26 weeks 52 weeks
ended ended ended
24 December 25 December 25 June
2022 2021 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------ ------------ --------
Underlying EBITDA 11,394 11,337 23,428
Depreciation and amortisation (5,077) (5,393) (10,480)
Free trade loan discounts - (1) (2)
(Loss)/profit on sale of assets (excluding
property) (35) 4 (53)
-------------------------------------------------- ------------ ------------ --------
Underlying operating profit 6,282 5,947 12,893
Net underlying finance costs pre IFRS 16 (2,179) (2,295) (4,355)
-------------------------------------------------- ------------ ------------ --------
Net underlying finance costs (2,779) (2,915) (5,599)
-------------------------------------------------- ------------ ------------ --------
Underlying profit before taxation 3,503 3,032 7,294
Profit on disposal of properties 2,639 1,487 1,709
Investment property fair value movements 136 300 520
Separately disclosed operating charges:
Impairment of intangible assets, properties,
right-of-use assets and assets held for sale - (148) (2,863)
Other operating (charges)/credits excluded
from underlying results (798) 599 393
Separately disclosed finance costs:
Settlement of ineffective portion of interest
rate swap (73) - -
Write-off of unamortised loan fees on refinancing (141) - -
Fair value movements on financial instruments
credited to profit and loss 195 95 397
Costs relating to the agreement of covenant
waivers with our lenders - - (50)
Costs relating to the transition from LIBOR
to SONIA for sterling debt instruments - - (33)
-------------------------------------------------- ------------ ------------ --------
Profit before taxation 5,461 5,365 7,367
-------------------------------------------------- ------------ ------------ --------
Separately disclosed operating charges:
During the 26 weeks ended 24 December 2022, separately disclosed
operating charges comprise:
a) Professional fees of GBP491,000 relating to the extension of
our distribution agreement with our logistics partner.
b) Professional fees of GBP269,000 relating to two company
acquisitions (see note 9).
c) Professional fees of GBP38,000 relating to the transition of
the pension scheme administration to an independent master
trust.
During the 26 weeks ended 25 December 2021, separately disclosed
operating charges comprised:
a) An impairment charge of GBP148,000 in relation to three
freehold properties.
b) A recovery of GBP156,000 in relation to a previously
disclosed fraud carried out by an employee.
c) The release of a provision to the value of GBP443,000 in
respect of an inquiry opened by HMRC relating to the provision of
uniforms and training to employees, which was closed in March
2022.
During the 52 weeks ended 25 June 2022, separately disclosed
operating charges comprised:
a) An impairment charge of GBP2,863,000 in relation to seven
freehold properties and eight right-of-use assets.
b) A recovery of GBP159,000 in relation to previously disclosed
fraud carried out by an employee.
c) The release of a provision to the value of GBP443,000 in
respect of an inquiry opened by HMRC relating to the provision of
uniforms and training to
employees, which was closed in March 2022.
d) Professional fees of GBP47,000 relating to two company
acquisitions which completed after the year end (see note 9).
e) Professional fees of GBP162,000 relating to the transition of
the pension scheme administration to an independent master
trust.
Separately disclosed finance costs:
During the 26 weeks ended 24 December 2022, the Group settled
the ineffective portion of the interest rate swap for cash
consideration of GBP73,000, wrote off GBP141,000 of unamortised
finance costs relating to the previous facility, and recognised a
credit of GBP195,000 in respect of the ineffective portion of the
movement in fair value interest rate swaps.
During the 26 weeks ended 25 December 2021, the Group recognised
a credit of GBP95,000 in respect of the ineffective portion of the
movement in fair value interest rate swaps.
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.
3 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 CODM is
the Chief Executive Officer.
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
26 weeks ended 24 December 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- ----------- -------- -------------- --------
Revenue 30,320 36,896 17,445 669 85,330
--------------------------------------- -------- ----------- -------- -------------- --------
Underlying operating (loss)/profit (449) 4,680 6,884 (4,833) 6,282
Items excluded from underlying
results - (3) - (795) (798)
--------------------------------------- -------- ----------- -------- -------------- --------
Divisional operating (loss)/profit (449) 4,677 6,884 (5,628) 5,484
Net underlying finance costs (2,779)
Finance costs excluded from underlying
results (214)
Fair value movements on ineffective
element of cash flow hedges 195
Profit on disposal of property 2,639
Investment property fair value
movements 136
--------------------------------------- -------- ----------- -------- -------------- --------
Profit before taxation 5,461
--------------------------------------- -------- ----------- -------- -------------- --------
Other divisional information
Capital expenditure - tangible
and intangible assets 978 6,465 1,408 629 9,480
Depreciation and amortisation
pre IFRS 16 785 1,410 1,235 225 3,655
Depreciation and amortisation 840 2,274 1,650 313 5,077
Underlying divisional EBITDA pre
IFRS 16 346 5,662 7,901 (4,561) 9,348
Underlying divisional EBITDA 405 6,967 8,542 (4,520) 11,394
Number of pubs - 67 229 5 301
--------------------------------------- -------- ----------- -------- -------------- --------
1. GBP669,000 of unallocated income (2021: GBP535,000) 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(2) Total
26 weeks ended 25 December 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- ----------- -------- -------------- --------
Revenue 30,555 31,261 16,378 535 78,729
Other income(1) - 121 - - 121
------------------------------------ -------- ----------- -------- -------------- --------
Underlying operating profit/(loss) 39 4,572 5,676 (4,340) 5,947
Items excluded from underlying
results - - (124) 575 451
------------------------------------ -------- ----------- -------- -------------- --------
Divisional operating profit/(loss) 39 4,572 5,552 (3,765) 6,398
------------------------------------ -------- ----------- -------- -------------- --------
Net underlying finance costs (2,915)
Fair value movements on ineffective
element of cash flow hedges 95
Profit on disposal of property 1,487
Investment property fair value
movements 300
------------------------------------ -------- ----------- -------- -------------- --------
Profit before taxation 5,365
------------------------------------ -------- ----------- -------- -------------- --------
Other divisional information
Capital expenditure - tangible
and intangible assets 604 774 891 264 2,533
Depreciation and amortisation
pre IFRS 16 806 1,462 1,315 191 3,774
Depreciation and amortisation 856 2,472 1,805 260 5,393
Impairment of property, plant
and equipment, goodwill and assets
held for sale - - 124 24 148
Underlying divisional EBITDA pre
IFRS 16 840 6,107 7,124 (4,168) 9,903
Underlying divisional EBITDA 906 7,028 7,480 (4,077) 11,337
Number of pubs - 64 232 6 302
------------------------------------ ---- ------ ------ ------- ------
1. Other income includes Omicron Hospitality and Leisure Grants
administered by local councils in response to the outbreak of the
Omicron variant of COVID-19 in December 2021.
2. GBP535,000 of unallocated income 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(2) 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(1) - 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)
--------------------------------------- -------- ----------- -------- -------------- --------
Divisional 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
--------------------------------------- -------- ----------- -------- -------------- --------
Other divisional 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 divisional EBITDA pre
IFRS 16 1,394 10,920 15,812 (8,143) 19,983
Underlying divisional EBITDA 1,508 12,882 16,967 (7,929) 23,428
Number of pubs - 63 231 6 300
------------------------------------ ------ ------- ------- ------- -------
1. Other income includes Omicron Hospitality and Leisure Grants
administered by local councils in response to the outbreak of the
Omicron variant of COVID-19 in December 2021.
2. GBP910,000 of unallocated income includes rent receivable
from investment properties and other non-core trading income.
Unallocated expenses primarily represent Head Office support
costs.
4 Net finance costs
26 weeks 26 weeks
ended ended 52 weeks
24 December 25 December ended
2022 2021 25 June 2022
Total statutory Total statutory Total statutory
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------------- ---------------- ----------------
Finance costs
Interest expense arising on:
Financial liabilities at amortised cost
- bank loans 2,181 2,300 4,363
Financial liabilities at amortised cost
- lease liabilities 600 620 1,244
Unwinding of discounts on provisions (2) (5) (8)
-------------------------------------------------- ---------------- ---------------- ----------------
Underlying net finance costs 2,779 2,915 5,599
-------------------------------------------------- ---------------- ---------------- ----------------
Finance costs excluded from underlying
results
Settlement of ineffective portion of interest
rate swap 73 - -
Write-off of unamortised loan fees on refinancing 141 - -
Costs relating to the agreement of covenant
waivers with our lenders - - 50
Costs relating to the transition from LIBOR
to SONIA for sterling debt instruments - - 33
Ongoing fair value movements on financial
instruments credited to profit and loss (195) (95) (397)
-------------------------------------------------- ---------------- ---------------- ----------------
Total finance costs excluded from underlying
results 19 (95) (314)
-------------------------------------------------- ---------------- ---------------- ----------------
Net finance costs 2,798 2,820 5,285
-------------------------------------------------- ---------------- ---------------- ----------------
5 Taxation
52 weeks
ended
26 weeks ended 24 26 weeks ended 25 25 June
December 2022 December 2021 2022
======================================== ======================================== ==========
Excluded Excluded
Tax charged to the Underlying from underlying Total Underlying from underlying Total Total
income results results statutory results results statutory statutory
statement GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ---------------- ---------- ---------- ---------------- ---------- ----------
Current income tax
charge/(credit) 424 (114) 310 - - - -
Deferred income tax
charge 322 569 891 687 406 1,093 1,087
---------------------- ---------- ---------------- ---------- ---------- ---------------- ---------- ----------
Total tax charged to
the
income statement 746 455 1,201 687 406 1,093 1,087
---------------------- ---------- ---------------- ---------- ---------- ---------------- ---------- ----------
Tax charged to other comprehensive income
----------------------------------------------------------------------------------------------------------------------
Deferred tax charge 318 197 561
---------------------- ---------- ---------------- ---------- ---------- ---------------- ---------- ----------
Total tax charged to
other
comprehensive income 318 197 561
---------------------- ---------- ---------------- ---------- ---------- ---------------- ---------- ----------
Taxation on the underlying result for the 26 weeks ended 24
December 2022 has been provided at 21.3% (2021: 22.7%) based on the
current best estimate of the effective tax rate for the 52 weeks to
24 June 2023. The average statutory rate of corporation tax for the
52 weeks to 24 June 2023 is expected to be 20.5% (52 weeks to 25
June 2022: 19.0%).
6 Dividends
26 weeks 26 weeks 52 weeks
ended ended ended
24 December 25 December 25 June
2022 2021 2022
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ------------ --------
Declared and paid during the year
Final dividend for 2022: 15.00p (2021:
nil) per ordinary share 2,227 - -
Interim dividend for 2022: 3.50p per ordinary
share - - 520
---------------------------------------------- ------------ ------------ --------
Dividends paid 2,227 - 520
---------------------------------------------- ------------ ------------ --------
The interim dividend, in respect of the period ended 24 December
2022, at a cost of GBP590,000 (for the period ended 25 December
2021: GBP520,000), is to be paid on 17 April 2023 to shareholders
on the register at the close of business on 31 March 2023.
7 Earnings per share
26 weeks 26 weeks 52 weeks
ended ended ended
24 December 25 December 25 June
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------ ------------ --------
Profit attributable to equity shareholders 4,260 4,272 6,280
Items excluded from underlying results (1,503) (1,927) (448)
------------------------------------------- ------------ ------------ --------
Underlying profit attributable to equity
shareholders 2,757 2,345 5,832
------------------------------------------- ------------ ------------ --------
Number Number Number
Weighted average number of shares in issue 14,752 14,775 14,784
Dilutive outstanding options 90 190 62
------------------------------------------- ------------ ------------ --------
Diluted weighted average share capital 14,842 14,965 14,846
------------------------------------------- ------------ ------------ --------
Earnings per 50p ordinary share
------------------------------------------- ------------ ------------ --------
Basic 28.9p 28.9p 42.5p
Diluted 28.7p 28.5p 42.3p
Underlying basic 18.7p 15.9p 39.4p
------------------------------------------- ------------ ------------ --------
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 90 (2021: 190) dilutive potential shares,
which excludes shares held by trusts in respect of employee
incentive plans and options.
Underlying basic earnings per share are presented to eliminate
the effect of the non-underlying items and the tax attributable to
those items on basic and diluted earnings per share.
8 Property, plant and equipment
Plant,
Leasehold machinery,
properties vehicles Fixtures Assets
Freehold under and and under
properties 50 years containers fittings construction Total
Group and Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
Valuation or cost
At 26 June 2021 254,563 2,088 37,106 95,319 230 389,306
Additions 45 119 454 4,098 513 5,229
Disposals (6,051) (39) (45) (5,021) (12) (11,168)
Transfers within property, plant and
equipment - - 20 34 (54) -
Transfers to investment property (326) - - (198) - (524)
Transfers from investment property 20 - - - - 20
Transfers to assets held for sale (1,272) - - (375) - (1,647)
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
At 25 June 2022 246,979 2,168 37,535 93,857 677 381,216
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
Additions 3,195 1 423 2,732 1,077 7,428
Disposals - (39) - (729) - (768)
Transfers within property, plant and
equipment 1 - - 69 (70) -
Transfers to assets held for sale (828) - - (292) - (1,120)
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
At 24 December 2022 249,347 2,130 37,958 95,637 1,684 386,756
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
Accumulated depreciation and impairment
At 26 June 2021 13,269 978 31,035 58,914 47 104,243
Charge for year 564 128 1,011 5,587 - 7,290
Impairment 1,141 13 - 407 - 1,561
Disposals (1,695) (39) (44) (3,998) (1) (5,777)
Transfers to investment property (74) - - (130) - (204)
Transfers to assets held for sale (263) - - (285) - (548)
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
At 25 June 2022 12,942 1,080 32,002 60,495 46 106,565
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
Charge for period 289 40 494 2,689 - 3,512
Disposals - (39) - (674) - (713)
Transfers to assets held for sale (19) - - (179) - (198)
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
At 24 December 2022 13,212 1,081 32,496 62,331 46 109,166
------------------------------------- ----------- ----------- ----------- --------- ------------- --------
Net book values
At 24 December 2022 236,135 1,049 5,462 33,306 1,638 277,590
At 25 June 2022 234,037 1,088 5,533 33,362 631 274,651
At 26 June 2021 241,294 1,110 6,071 36,405 183 285,063
Impairment considerations
The Group has performed an assessment of whether any indicators
of impairment exist. This assessment included a review of internal
and external indicators and the Group has concluded that no
impairment indicators existed at 24 December 2022.
There will be an impairment if the recoverable amount is lower
than carrying value. The recoverable amount is taken as the higher
of the fair value less costs to sell and its value in use. The same
assumptions to calculate value in use are used for right-of-use
assets as for property, plant and equipment. During the 26 weeks
ended 24 December 2022, the Group recognised a charge of nil (2021:
GBP148,000) in respect of the write-down of freehold properties
(2021: three freehold properties) to their recoverable value.
During the 52 weeks ended 25 June 2022, the Group recognised a
charge of GBP2,863,000 in relation to seven freehold properties and
eight right-of-use assets.
9 ACQUISITION OF SUBSIDIARY UNDERTAKINGS
On 28 July 2022, the Company acquired 100% of the issued share
capital of East Anglia Pub Corporation Limited, a company which
owns and operates one pub in Leigh-on-Sea, Essex, for cash
consideration of GBP3,653,000. The fair value of the assets
acquired at that date was GBP1,952,000, which was less than the
fair value of the consideration by GBP1,701,000, which has been
treated as goodwill.
The acquisition has been accounted for under the purchase
method. The following table sets out the book values of the
identifiable assets and liabilities acquired, and their fair value
to the Group:
Provisional
fair value
Book value Revaluation to Group
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ----------- -----------
Non-current assets
Property, plant and equipment 862 1,138 2,000
Current assets
Inventories 12 - 12
Trade and other receivables - - -
Cash and cash equivalents 576 - 576
-------------------------------- ---------- ----------- -----------
Total assets 1,450 1,138 2,588
Trade and other payables (422) - (422)
Deferred tax liabilities (30) (184) (214)
-------------------------------- ---------- ----------- -----------
Total liabilities (452) (184) (636)
-------------------------------- ---------- ----------- -----------
Net assets 998 954 1,952
Goodwill arising on acquisition 1,701
-------------------------------- ---------- ----------- -----------
3,653
-------------------------------- ---------- ----------- -----------
Satisfied by:
Cash 3,653
-------------------------------- ---------- ----------- -----------
The business of East Anglia Pub Corporation Limited was hived up
to Shepherd Neame Limited at the date of acquisition, and results
since this date have been recognised in this company.
On 19 July 2022, the Company acquired 100% of the issued share
capital of Urban Reef Restaurant Limited, a company which owns and
operates one pub in Boscombe, Bournemouth, for cash consideration
of GBP1,618,000. The fair value of the assets acquired at that date
was GBP1,352,000, which was less than the fair value of the
consideration by GBP266,000, which
has been treated as goodwill.
Provisional
fair value
Book value Revaluation to Group
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ----------- -----------
Non-current assets
Property, plant and equipment 390 1,110 1,500
Current assets
Inventories 10 - 10
Trade and other receivables 107 - 107
Cash and cash equivalents 190 - 190
-------------------------------- ---------- ----------- -----------
Total assets 697 1,110 1,807
Trade and other payables (455) - (455)
Deferred tax liabilities (27) 27 -
-------------------------------- ---------- ----------- -----------
Total liabilities (482) 27 (455)
-------------------------------- ---------- ----------- -----------
Net assets 215 1,137 1,352
Goodwill arising on acquisition 266
-------------------------------- ---------- ----------- -----------
1,618
-------------------------------- ---------- ----------- -----------
Satisfied by:
Cash 1,568
Contingent consideration 50
-------------------------------- ---------- ----------- -----------
1,618
-------------------------------- ---------- ----------- -----------
The GBP50,000 contingent consideration has not yet been
settled.
The business of Urban Reef Restaurant Limited was hived up to
Shepherd Neame Limited at the date of acquisition, and results
since this date have been recognised in this company.
10 Lease liabilities and right-of-use assets
Set out below are the carrying amounts of the Group's
right-of-use assets and lease liabilities, and the movements during
the period:
Right-of-use
assets Lease liabilities
Group and Company GBP'000 GBP'000
------------------------------------------ ------------ -----------------
Net carrying value as at 26 June 2021 47,311 58,326
Additions 339 322
Disposals (15) (672)
Lease amendments - rent concessions (48) (164)
Lease amendments - other(1) 1,034 1,049
Depreciation (3,160) -
Impairment (1,226) -
Accretion of interest - 1,245
Payments - (4,220)
------------------------------------------ ------------ -----------------
Net carrying value as at 25 June 2022 44,235 55,886
Additions 3,168 1,718
Lease amendments - other(1) (10) (12)
Depreciation (1,543) -
Accretion of interest - 620
Payments - (2,081)
------------------------------------------ ------------ -----------------
Net carrying value as at 24 December 2022 45,850 56,131
------------------------------------------ ------------ -----------------
Right-of-use assets predominantly relate to leasehold
properties, along with motor vehicles and other equipment.
1. Lease amendments include lease terminations, modifications,
reassessments and extensions to existing lease arrangements.
11 Borrowings
24 December 25 December 25 June
2022 2021 2022
Group and Company GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- --------
Bank loans 29,400 52,000 46,400
Other loans 55,000 35,000 35,000
Less: capitalised loan arrangement fees (929) (582) (530)
------------------------------------------ ----------- ----------- --------
Total borrowings 83,471 86,418 80,870
Analysed as:
Borrowings within current liabilities 1,600 1,600 1,600
Borrowings within non-current liabilities 81,871 84,818 79,270
------------------------------------------ ----------- ----------- --------
83,471 86,418 80,870
------------------------------------------ ----------- ----------- --------
Borrowings at the end of the reporting period comprise a 20-year
term loan of GBP35,000,000 arranged in October 2018, a 10-year term
loan of GBP20,000,000 arranged in October 2022, a 20-year term loan
of GBP20,900,000 arranged in April 2007 and drawings of
GBP8,500,000 on the revolving credit facility.
The GBP35,000,000 and GBP20,000,000 loans represent a private
placement of loan notes with BAE Systems Pension Funds Investment
Management Ltd and are repayable on 30 October 2038 and 26 October
2032 respectively. The interest rates are fixed at 3.99% and 5.47%
respectively, and both are payable six-monthly. Due to a technical
breach of covenants, the interest rate on the GBP35,000,000 loan
was temporarily increased to 4.49% until the Company's leverage
ratio returned to an accepted level for four consecutive quarters.
The interest rate reverted to 3.99% on 1 January 2023.
The GBP20,900,000 term loan was provided by Lloyds Bank plc and
is repayable in four instalments of GBP1,600,000 payable in
December every year, with the outstanding balance being repayable
on 31 December 2026. The interest rate payable is three-month SONIA
plus a margin dependent on the ratio of net debt to underlying
EBITDA. The variable interest payments have been swapped for fixed
interest payments payable quarterly.
The four-year revolving credit facility with Lloyds Bank plc and
HSBC Bank plc matures on 31 December 2026. This is a committed
facility which permits drawings of different amounts and for
different periods. These drawings carry interest at a margin above
SONIA with a commitment payment on the undrawn portions. Interest
is payable at each loan renewal date.
The Group has a GBP5,000,000 overdraft facility within the
revolving credit facility with interest linked to the Bank of
England base rate.
At the end of the reporting period, GBP26,500,000 (2021:
GBP30,500,000) of the total GBP35,000,000 (2021: GBP60,000,000)
committed revolving credit bank facility was available and undrawn,
with nil (2021: nil) drawn on the GBP5,000,000 overdraft
facility.
The Company's loans and overdraft are secured by a first
floating charge over the Company's assets.
12 Notes to the Cash Flow Statement
a Reconciliation of operating profit to cash generated by
operations
26 weeks 52 weeks
ended ended
26 weeks ended 24 25 December 25 June
December 2022 2021 2022
Excluded
Underlying from underlying
results results Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating profit 6,282 (798) 5,484 6,398 10,423
Adjustment for:
Depreciation and amortisation 5,077 - 5,077 5,393 10,480
Impairment of property, plant and
equipment - - - 74 1,561
Impairment of intangible assets - - - - 52
Impairment of right-of-use assets - - - - 1,226
Impairment of assets held for sale - - - 74 24
Share-based payments expense 206 - 206 243 183
Decrease/(increase) in inventories 46 - 46 (1,748) (747)
Increase in debtors and prepayments (459) - (459) (2,485) (2,242)
(Decrease)/increase in creditors
and accruals (1,327) (55) (1,382) (883) 338
Free trade loan discounts 1 - 1 1 -
Loss/(profit) on sale of assets
(excluding property) 35 - 35 (4) 53
Interest received - - - 3 -
Income tax paid (114) - (114) - -
Fair value movements on financial
assets (186) - (186) (32) (210)
------------------------------------ ---------- ---------------- -------- ------------ --------
Net cash inflow from operating
activities 9,561 (853) 8,708 7,034 21,141
------------------------------------ ---------- ---------------- -------- ------------ --------
b Reconciliation of movement in cash to movement in net debt
26 weeks 26 weeks 52 weeks
ended ended ended
24 December 25 December 25 June
2022 2021 2022
Group and Company GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------ ---------
Opening cash and overdraft 5,579 5,560 5,560
Closing cash and overdraft 691 4,041 5,579
----------------------------------------- ------------ ------------ ---------
Movement in cash in the period (4,888) (1,519) 19
Cash from increase in bank loans (3,000) - -
Cash used to repay bank loans - 10,000 15,600
Movement in loan issue costs 399 (53) (105)
----------------------------------------- ------------ ------------ ---------
Movement in net debt resulting from cash
flows (7,489) 8,428 15,514
Net debt at beginning of the period (75,291) (90,805) (90,805)
----------------------------------------- ------------ ------------ ---------
Net debt (82,780) (82,377) (75,291)
----------------------------------------- ------------ ------------ ---------
Current lease liability (1,976) (4,379) (2,780)
Non-current lease liability (54,155) (53,021) (53,106)
----------------------------------------- ------------ ------------ ---------
Statutory net debt (138,911) (139,777) (131,177)
----------------------------------------- ------------ ------------ ---------
c Analysis of net debt
Issue
costs
of new December
June 2022 Cash flow New loans loans Non-cash 2022
Group and Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 5,579 (4,888) - - - 691
Debt due in less than one year (1,600) - - - - (1,600)
Debt due after more than one
year (79,270) - (3,000) 598 (199) (81,871)
------------------------------- --------- --------- --------- -------- -------- ---------
Net debt (75,291) (4,888) (3,000) 598 (199) (82,780)
------------------------------- --------- --------- --------- -------- -------- ---------
Lease liabilities (55,886) 2,081 - - (2,326) (56,131)
------------------------------- --------- --------- --------- -------- -------- ---------
Statutory net debt (131,177) (2,807) (3,000) 598 (2,525) (138,911)
------------------------------- --------- --------- --------- -------- -------- ---------
Non-cash movements in lease liabilities comprises lease
additions and modifications of GBP1,706,000 (2021: GBP231,000),
interest of GBP620,000 (2021: GBP620,000), less waivers of nil
(2021: GBP145,000).
13 Capital commitments
Contracts for capital expenditure not provided for in the
accounts amounted to GBP1,448,000 (2021: GBP102,000).
14 Related party transactions
George Barnes is an Executive Director of Shepherd Neame
Limited. Mr A J A Barnes, a close member of George Barnes' family,
is a partner at Barnes Solicitors LLP. During the 26 weeks ended 24
December 2022, Barnes Solicitors LLP provided legal services at a
cost of GBP10,000, including VAT and disbursements to third parties
(2021: GBP1,500). No balance was owed to Barnes Solicitors LLP by
Shepherd Neame Limited at the end of the reporting period (2021:
nil).
Nigel Bunting, an Executive Director of Shepherd Neame Limited,
is also a Director of Davy and Company Limited. During the 26 weeks
ended 24 December 2022, the Group did not purchase any goods (2021:
nil) but made sales to the value of GBP195,000 (2021: GBP49,000) to
Davy and Company Limited and its associated companies. At the end
of the reporting period, no balance was owed by Shepherd Neame
Limited to the Davy Group of companies (2021: nil) and GBP52,000
was owed to the Group by the Davy Group of companies (2021:
GBP7,000).
Hilary Riva, a Non-Executive Director of Shepherd Neame Limited,
is also a Director of the Alexander Centre CIC. During the 26 weeks
ended 24 December 2022, the Group did not purchase any goods (2021:
GBP1,000) but made sales to the value of GBP4,000 (2021: GBP3,000)
to the Alexander Centre CIC. At the end of the reporting period, no
balance was owed by Shepherd Neame Limited to the Alexander Centre
CIC (2021: nil) and no balance was owed to the Group by the
Alexander Centre CIC (2021: nil).
All the transactions referred to above were made in the ordinary
course of business on an arm's-length basis and outstanding
balances were not overdue. There is no overall controlling party of
Shepherd Neame Limited.
1 H1 2020 is the first half of the financial period of the 52
weeks to the 27 June 2020. This first half equated to the 26 weeks
ended 28 December 2019, restated on an IFRS basis
2 Profit/(loss) before any profit or loss on the disposal of
properties, investment property fair value movements and operating
charges which are either material or infrequent in nature and do
not relate to the underlying performance
3 Net debt excluding lease liabilities comprises cash, bank
overdrafts, bank and other loans less unamortised loan fees
4 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
5 Net assets at the reporting date divided by the number of
shares in issue being 14,857,500 50p shares
6 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
26 week period in the prior year for pubs that were in the estate
in the same period within both years
7 Tenanted income calculated to exclude from both periods those
pubs which have not been in the estate throughout the two periods.
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 26 week period in the
prior year for pubs that were trading in both 26-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, including Singha beer which
the Company commenced brewing in March 2022
10 The periods referred to for financial year 2022 are the
comparative month(s) of January, February and March 2022 which are
during the financial year 52 weeks to 25 June 2022
11 The periods referred to for financial year 2020 are the
comparative month(s) of January, February and March 2020 which are
during the financial year 52 weeks to 27 June 2020. The UK went
into lockdown due to COVID-19 on 23 March 2020
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END
NEXSEDFWFEDSELD
(END) Dow Jones Newswires
March 22, 2023 03:00 ET (07:00 GMT)
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