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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Shepherd Neame Limited | AQSE:SHEP | Aquis Stock Exchange | Ordinary Share | GB00BMQX2R72 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 690.00 | 665.00 | 705.00 | 690.00 | 680.40 | 690.00 | 3,507 | 16:29:52 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2023 to May 2024
TIDMSHEP
RNS Number : 7549N
Shepherd Neame Limited
27 September 2023
Shepherd Neame
Preliminary results for the 52 weeks to 24 June 2023
Shepherd Neame, Britain's Oldest Brewer and owner and operator of 296 high quality pubs in Kent and the Southeast, today announces results for the 52 weeks ended 24 June 2023.
Despite challenging economic conditions, we achieved record revenues and an increase in underlying profits to the end of June 2023. Consumer demand was strong throughout the year but significant inflationary pressure has increased costs across the business.
Strong demand, record revenue, improved underlying profit
-- Revenue for the year grew by +9.7% to a record GBP166.3m (2022: GBP151.5m).
-- Underlying profit before tax [1] grew by +3.8% to GBP7.6m (2022: GBP7.3m).
-- Statutory profit before tax was GBP4.9m (2022: GBP7.4m).
-- Year of increased investment at GBP17.2m (2022: GBP5.4m).
-- Underlying basic earnings per share [2] was 41.1p (2022: 39.4p). Basic earnings per share was 23.5p (2022: 42.5p).
-- Net asset value per share [3] has increased to GBP12.05 (2022: GBP11.94).
-- Long term financing in place, with 65% of debt fixed at favourable rates.
-- Full year dividend of 20.00p (2022: 18.50p), an increase of +8.1%.
Strong retail sales, particularly in drinks (72 pubs)
During the period we have transferred six tenanted pubs to retail. We have acquired four pubs and sold eight properties.
Hot Features
Premium
Performance
2023 v 2022
Total retail LFL sales
[4] +12.9%
-------------
VAT adjusted LFL retail
sales +17.0%
-------------
LFL drink sales +22.4%
-------------
LFL food sales +3.1%
-------------
LFL accommodation sales
(248 rooms) -4.2%
-------------
-- Within the M25, retail LFL sales 4 are +30.6% vs 2022, driven largely by increased momentum in the return to offices. Outside the M25, retail LFL sales 4 are +6.6% vs 2022.
-- Total occupancy was 74% (2022: 76%) and RevPAR GBP81 (2022: GBP80).
Tenanted pubs (217 pubs) remained robust during the period
Performance
2023 v 2022
Tenanted LFL pub income
[5] +3.9%
-------------
Average pub income [6] +3.4%
-------------
Brewing and Brands: Volumes resilient but margins impacted by exceptional inflationary pressures
Performance
2023 v 2022
Total beer volume [7] -2.7%
-------------
Own brewed volume [8] +5.2%
-------------
-- Increase in own beer volume 7 driven by the brewing of Singha beer, but has been offset by the declines in cask ale and premium bottled ales across the market.
-- Material cost inflation with cost of goods for bottled beers up in excess of GBP2m year on year.
Current trade encouraging and continuing positive pub trends over the summer
Performance versus
2023 [9]
9 weeks to 26 Aug tenanted
LFL pub income 5 +3.0%
-------------------
13 weeks to 23 Sept LFL
retail sales 4 +5.6%
-------------------
13 weeks to 23 Sept total
beer volumes 7 -10.3%
-------------------
13 weeks to 23 Sept own
beer volumes 8 -15.9%
-------------------
Jonathan Neame, CEO of Shepherd Neame, said:
"Demand has been strong all year with recent trade in our pubs encouraging.
We have faced considerable inflationary challenges in the last year but these are now easing.
We have an excellent pub estate which has been performing in line with the best in the sector. We have a loyal customer base, a high profile within the communities we serve, and we have an ambitious investment programme ahead.
The turmoil of the last few years is now settling and the outlook is positive. We have much to look forward to. The balance sheet remains strong and the business has momentum in our pipeline of investment. We are confident we have the team and skills to deliver good returns for our shareholders over the long term."
27 September 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 1,800 people.
The Company operates 296 pubs, of which 217 were tenanted or leased, 72 managed and seven 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.
Chairman's statement
Overview
In recent years your Company has been finding its way through a labyrinth of successive challenges common to all in the pubs and brewing sector and so I am pleased that we can report a year of progress, with good growth in revenue compared with last year and growth, though less significant, in underlying profits.
The gap between these two rates of growth is largely explained by the exceptional inflation in many of our costs, impacted by constraints on supply resulting first from lockdown and then from the war in Ukraine. These factors are covered in the Chief Executive's Review. In many of these areas we are beginning to see some relief. The management team has worked extraordinarily hard to cope with sudden and drastic changes in external conditions. Their commitment and adaptability give the Board as a whole confidence in the future.
Financial results and dividend
Revenue for the year rose by +9.7% to GBP166.3m (2022: GBP151.5m). Statutory profit before tax was GBP4.9m (2022: GBP7.4m). Underlying profit before tax was GBP7.6m (2022: GBP7.3m). Basic earnings per share was 23.5p (2022: 42.5p). Underlying basic earnings per share was 41.1p (2022: 39.4p).
We have recognised an impairment charge in the year of GBP4.5m (2022: GBP2.9m). This is driven in part by the rise in interest rates which has resulted in a sharp increase in the weighted average cost of capital. This has led to an increase in write-downs in our pub estate. Nonetheless, the Company's net asset value per share has increased to GBP12.05 (2022: GBP11.94).
The Board has declared a final dividend of 16.00p, compared with 15.00p last year, a rise of +6.7%. In conjunction with the interim dividend paid in April, this brings the total dividend for the year to 20.00p, compared with 18.50p last year, an increase of +8.1%.
We are acutely conscious of the importance of dividends, current and future, to the Company's shareholders. In deciding on the appropriate level of dividend, we take into account the investment needs of the business, the level of debt, and the desire to be prudent. By maintaining a reasonable pay-out ratio, we should retain sufficient cash flow for investment, for growth, and future increases in dividend.
Financing
I am pleased to confirm that in November 2022 we completed the restructuring of our borrowings, foreshadowed in last year's report. The result is that our debt facilities give us ample headroom when needed; the debt is now longer-term than before, and moreover at a fixed rate which in view of recent developments in the gilt market appears to be on very advantageous terms. As noted in detail in the Finance Review, the ratio of debt to equity and to EBITDA rose slightly during the year, while remaining in what we regard as a reasonable range.
Board
Jonathon Swaine joined the Board at the beginning of the financial year, as noted in last year's report.
George Barnes, an Executive Director since 2001, will become Non-Executive on 1st January 2024. In addition to his Non-Executive role he will provide continuity by working on specific projects to ensure a smooth transition in his property responsibilities.
All the Directors, Executive and Non-Executive, have played a thoroughly active part in the year under review and in past years and I would like to thank all of them for their dedication to the cause.
Outlook
In recent years the Company has weathered storms and tempests. It has been battered but is unbowed. We are fully alive to the challenge of providing growth in profits, cash flow and dividends and are extremely grateful for the patience of shareholders during this period in which dividends have been lower than previously.
There are plenty of challenges within the business to confront and surmount. There are also many opportunities: opportunities to manage our portfolio of pubs to ensure that we have the right pubs in the right places, that pubs are attractive, and that they make the best use of space, inside and outside; opportunities to encourage and incentivise existing licensees and when there are vacancies, find energetic and imaginative new licencees; and opportunities to optimise the brewing and brands division.
The business is fundamentally sound, at the heart of life, important to people's sense of community. We have excellent assets in the form of a large freehold property portfolio with many high quality pubs.
We have a three-legged strategy - retail pubs, tenanted pubs and brewing and brands - which provides diversification and integration, and we have a management fully committed to making the best of each of these.
Above all we have our customers. We want more of them; we want them to come to our pubs, drink our beer and eat our food, and generally enjoy our hospitality. We want them to tell others about it and come back for more.
Our efforts in years to come will be on managing the balance of tradition and innovation, with emphasis on what customers want, different in each pub and with every type of customer, young and old, City or West End, rural or coastal, whether interested in having a good experience on a family outing or just a quiet pint with a friend. This report has evidence of all these things.
On top of this we remain optimistic about the future of our heartland. The long-term economic development of Kent continues to unfold with the opening of Thanet Parkway station, which reduces journey times to London from the Thanet towns to under 70 minutes.
All of us on the Board want to express our great appreciation of all those in the Company and associated with the Company - in pubs, both retail and tenanted, in the brewery and in head office - who have worked so hard to ensure that the Company progresses and prospers.
Richard Oldfield
Chairman
Chief Executive's Review
Overview
The last few years have presented exceptional challenges that none in the industry have faced before, and so I am pleased to report an encouraging set of results and good progress towards our strategic goals.
Shepherd Neame is built on strong foundations. We are a long-established business, with a long-term focus. We have a clear strategy focused on developing unique and characterful pubs, predominantly freehold, brewing distinctive beers, serving local and fresh food, with a great team of dedicated people.
This is the first full year restriction free since 2020, but it has brought its own headwinds and fresh challenges. We have been tested again, and so have had to remain agile and responsive to change in the business.
I am very grateful to our teams who have shown further extraordinary resilience to find a path to deliver record revenues, up by +9.7% to GBP166.3m (2022: GBP151.5m), and to re-build momentum in our key strategic projects and investment programme.
We have consistently tracked ahead of the Coffer CGA Business Tracker for pubs in our retail like-for-like sales. Growth in tenanted pub like-for-like income is comparable with the best in the market. Total beer volume is, however, down on pre-pandemic levels, as the market has seen a shift away from cask and premium bottled ales.
Under normal conditions this performance would result in levels of profitability at pre-pandemic levels. But the impact of inflation on our business has been significant, as set out below.
The worst of inflation is starting to subside. With an improving outlook, our challenge now is to recover margins and drive higher returns, whilst continuing to serve our customers to the high standards they expect.
Building Momentum
Demand in pubs has remained strong throughout the year, in spite of the squeeze on household budgets. We have not experienced the reduced demand that has been evident in other parts of the consumer economy, as a result of the cost-of-living crisis.
We benefited from a good start to the year with a warm summer, and enjoyed record temperatures. The underlying performance has been driven by the progressive back-to-office momentum in towns and cities, particularly in central London. This has been partially offset by the repeated rail strikes, which cost us lost sales.
Christmas promised a great deal but the strikes hit the busiest week of the year and coincided with a spell of cold weather. The FIFA World Cup however provided a welcome boost to neighbourhood pubs in November.
Overseas tourists are returning to the UK, although there is further to go. The King's Coronation provided a great showcase for the country and hopefully will stimulate more inbound tourism.
Meeting the Inflation Challenge
Our greatest challenge has been dealing with the material increase in our cost base.
We have experienced three phases of inflation over the last two years:
-- the first was the inflationary surge in the summer of 2021, driven by supply chain shortages as demand suppressed during the pandemic returned;
-- the second was the removal of government support, in the form of business rates, furlough and VAT, and the step-up in national minimum wage rates. In 2022, the VAT benefit to us was valued at GBP2.1m;
-- the third was the inflationary surge in energy and grain prices, stimulated by the war in Ukraine which has led to much higher prices for almost all goods and services we purchase.
The Company has been well protected in a number of areas, with the majority of our debt on long-term fixed rates at low levels, and with all utilities in the brewery, and two thirds of our pub utilities, on a below-market fixed price deal until the end of 2024.
In last year's annual report we highlighted that we expected our cost base would increase by GBP5.7m in certain key categories. This included energy in our retail pubs (up +GBP1.2m), distribution costs (up +GBP2.0m), and brewery raw materials, such as glass and packaging waste (up +GBP2.5m).
In the event, inflation in our cost base was materially higher, calculated at GBP8.7m, as we faced further increases in costs for food and drink purchases, and labour rates, driven by the increase in the national minimum wage, which rose by +9.7% in April 2023.
All these factors have meant that we have had to increase prices in all channels. We are mindful that our customers face similar cost pressures in their own lives, with mortgage and energy rises squeezing household budgets. But thankfully demand has remained strong.
In most areas, the rate of inflation is now reducing and the outlook is improving. Food inflation remains high, driven by weather-related events and by the grain market; and there are some forecasts of higher energy costs this coming winter. But costs in other areas seem stable or are reducing.
These inflationary forces have resulted in higher interest rates which may squeeze some households as they come off fixed-rate mortgages. This may present a fresh challenge in 2024, if consumer demand reduces, but there is limited evidence of that so far.
Government Support for Pubs
Through the winter of 2022/23, pubs and small businesses were given some protection from high energy prices with the Energy Bills Relief Scheme. This has now ended, but new controls to protect small business from excess bills are being introduced. Whilst this is welcome, many pubs will continue to pay twice the amount for energy than they did before the war in Ukraine.
Many of our pubs continue to benefit from partial rates relief which will continue through to Spring 2024. We believe it is important that rates relief continues thereafter.
In August 2023, the UK Government introduced a new excise duty regime, which taxes alcohol according to its strength and where it is sold. This will mean even higher duties for wines, spirits, and bottled beers, but a welcome freeze on duties for draught beer and a new lower rate for beers under 3.4% ABV.
Our Strategic Objectives
Against this volatile cost backdrop, we continue to focus on those projects that will deliver against our long-term objectives.
Our goals are to Recruit New Customers, to Delight our Customers with Great Experiences, to Build a Great Team of Dedicated People and to Create Passionate Advocates for our Beers and Pubs.
We have invested in our head office teams to deliver against these goals. Specifically, we have built up our People Team to support learning and development of our own talent, improved retention levels and a focus on excellent service. We have strengthened our food development team to support the introduction of a menu refresh; and we have strengthened our property team and built the capacity of the IT team to deliver fresh projects.
Recruit New Customers
We acquired four new pubs at the start of the year, three in Essex and one in Bournemouth. We carried out a major redevelopment of the Crown at Chislehurst, and several smaller schemes including at the Old Jamaica Winehouse in the City, the Windsor Castle at Carshalton and created new outside space at the Botany Bay Hotel in Broadstairs.
We have completed a major scheme at the Duke of Cumberland in Whitstable in August 2023 to upgrade the whole site and add eight boutique bedrooms. We are on site at the Tom Cribb in Haymarket, which will reopen in October 2023. Beyond this, we have an ambitious programme for the coming year as we rebuild the momentum of our refurbishment programme.
Our signage and external decorations schemes continue to be rolled out, which will be substantially complete by the end of December 2024.
The Company's sponsorship of sporting clubs of all types is well known and highly successful. We have sponsored Kent County Cricket Club for many years, and we support many other cricket, golf and rugby clubs too. In recent years we have also built a good base in football. Last year we entered a partnership with Bromley FC, and this year we are delighted to have become the supplier to Millwall FC in Bermondsey.
We were the official beer supplier at the Open, supporting the Singha brand, as we were in 2021 and 2022, at Royal Liverpool in July 2023, and have extended our agreement for a further two years.
Delight our Customers with Great Experiences
We regularly review and enhance the drinks ranges within our pubs to ensure we offer a premium experience.
We have reintroduced our own Cask Club range with considerable success. We have commissioned the small-batch brewery and launched our first brew. This plant will enable us to develop a wider range of tastes and flavour in our new beers, and brew more speciality beers.
We have also expanded the range of third-party beers in our pubs. We are seeing good growth in premium world lagers, craft beers and stout. Singha is now stocked on draught in the majority of our outlets and is performing well. However, our partnership with Boston Beer for Sam Adams has now terminated and is not being renewed. We are expanding the distribution of Noughty Bear 0.5% beer on draught.
We continue to see excellent growth in key categories such as cocktails, rosé wines and low-alcohol drinks.
Consumers are looking for brands with local provenance. In this regard, we have developed Creekside Coffee, a full-flavour local blend, for our retail pubs.
In our food business, we have carried out a comprehensive overhaul of all menus in our retail pubs. The aim is to source the highest quality ingredients with a strong emphasis on seasonal and local produce. We review and change menus on a regular basis, to create more dynamic and seasonal choice for customers.
We have introduced a new kids' menu, - Menus for Minis - and we are donating 50p for every two-course meal sold to FareShare, our 2023 Charity of the Year.
Build a great Team of Dedicated People
A key focus this year has been to build the appropriate training and support infrastructure so that we can attract and retain the best people and build rewarding career pathways for those entering the pub trade.
We have introduced a wide range of apprenticeship courses at all levels, ranging from Level 2 to Level 7, and have successfully launched partnerships with new training providers for all our hospitality and catering needs.
Our apprentice programme has been highly successful and continues to gain momentum. Over 40 people have undertaken apprentice programmes this year and we have uncovered some outstanding talent for the future. Congratulations go to Sallyanne Carter of the George Hotel in Cranbrook, who was our Apprentice of the Year.
We have developed a Chef Academy and a chef mentoring programme, and are consequently attracting better chefs. Our Chef of the Year was Peter Baldwin of the Fish on the Green in Bearsted.
We have an excellent team of General Managers. We also aim to develop individual talent and nurture the next generation of General Managers from within the business. The success of this approach can be seen in recent appointments at the Evenhill in Littlebourne and at the Windsor Castle at Carshalton.
It is great to see how many of our tenanted pub partners run outstanding pubs. For example, Barons Pub Company run two of our pubs and won the Best Operations team and Best Pub Employer in the Publican Awards. Jo and Jane Mullane, won the Shepherd Neame Pub of the Year award for the exceptional and unique way that they run the New Flying Horse in Wye.
We regularly monitor what our teams say about us and were very pleased that our Employee Promoter Score via our Sheps Voice survey was 65.5% (2022: 65.0%). Our tenanted pub operations again scored in the top five of the Tenant Tracker industry benchmark survey.
Create Passionate Advocates for our Beers and Pubs
We have remodelled our service offer around five standards - Smile to get Smiles, Own it, Power the Party, Hop in your Heart, No Detail's too Small - and are building great team and customer engagement.
We have introduced a new framework to gather feedback from our customers on their experience in our retail pubs and hotels. We are building the number of responses throughout the year. We have achieved a Net Promoter Score of 60%.
Bishops Finger won the Taste of Kent Beer of the Year Award and Gold in the International Beer Challenge 2023, and three of our beers won Gold in the British Bottlers Institute Awards. All of our beers are now vegan-accredited by the Vegetarian Society.
We are also building long-term advocates for our beers through targeting high-profile events to showcase our beers. We have enjoyed a successful partnership with Dreamland in Margate, as they build a highly successful events venue, and we have supported Smoked and Uncut with the Pig Hotel Group.
We maintained a high presence in London through our support for the City Beerfest in the Guildhall Yard, Summer by the River near Tower Bridge and the University Boat Race.
We look to enhance the visit to the pub with more customer activity, for example, Shakespeare with Sheps, at the Belle Vue Tavern in Margate and at the Three Mariners at Oare, and promotions such as our Summer Drinks menu.
Do the Right Thing for our Communities
Shepherd Neame is a business that aims to put the brewery, its pubs and our people at the heart of our communities.
I am delighted that we raised GBP30,000 for our 2022 Charity of the Year, the Kent Wildlife Trust. Our 2023 Charity of the Year is FareShare - fighting hunger and tackling food waste.
We continue to support many community events including the Faversham Hop Festival which returned this year after a gap for the pandemic, and the ever-popular Faversham Literary Festival. We have continued to support the preservation of over 300 rare hop varieties in the National Hop Collection.
I congratulate the Flying Horse at Smarden for being recognised by Pub Aid for their fundraising efforts for the people of Ukraine.
We have made considerable progress this year in energy reduction initiatives. We have installed metering across the business so that we have more accurate data on consumption. We have successfully piloted new energy-saving technology in several pub cellars and introduced a Save While You Sleep initiative with Zero Carbon Forum in our retail pubs. We have trialled electric-only induction hobs to save energy in kitchens.
The results of these initiatives have been encouraging. We have a wider roll-out of these programmes in the coming year and will pilot further technology for new initiatives.
Business Operations
Retail and Tenanted Pubs Overview
As at June 2023 we owned 296 pubs (June 2022: 300), of which 217 (June 2022: 231) are tenanted or leased, 72 (June 2022: 63) are retail pubs and seven (June 2022: six) are operated on a free-of-tie basis as investment properties. 85% of our pubs are owned freehold.
During the period we have transferred six tenanted pubs to retail, and two to investment property. We have sold eight properties, including six pubs and two investment properties (six freehold disposals and two leases surrendered) and have acquired four pubs (three freehold pubs and one leasehold). These disposals have realised net proceeds of GBP2.3m (2022: GBP9.1m).
We have invested GBP17.2m in total, including GBP6.7m in new site acquisitions, including fees, and GBP10.5m in brewery and pub investments, of which the major projects have been GBP1.4m at the Crown at Chislehurst and a further GBP0.5m for partial completion of works at the Duke of Cumberland in Whitstable.
Retail Pubs and Hotels
For the 52 weeks to 24 June 2023, our retail pubs achieved strong growth. Total revenue was up +21.5% to GBP74.4m (2022: GBP61.2m). Same outlet like-for-like sales grew by +12.9%. VAT-adjusted like-for-like sales grew by +17.0%. Within the M25, like-for-like sales are +30.6%. Outside the M25 like-for-like sales are +6.6%.
All individual months were in growth on the prior year, with the strongest growth in July 2022, December 2022 and June 2023. December was nonetheless below expectations as we lost sales due to the rail strikes.
This growth has been mainly driven by drinks sales. Total drinks sales were up +31.3% to GBP43.4m, with like-for-like drinks sales +22.4%, driven largely by the recovery of our London pubs as people return to their offices.
Total food sales are up +15.4%, to GBP24.8m, with like-for-like food sales +3.1%.
We have seen slightly weaker room occupancy after the staycation boom of last year, with accommodation sales down -7.3% to GBP5.8m, and like-for-like accommodation sales down -4.2%. At June 2023, we operated 248 (2022: 218) rooms in our retail estate. Overall occupancy was slightly down at 74% (2022: 76%), but overall RevPAR was up to GBP81 (2022: GBP80).
Tenanted Pubs
Trade in our tenanted pubs has remained resilient during this period. Like-for-like tenanted pub income was +3.9%.
We have an outstanding tenanted estate with a first-class team of licensees. Although turnover levels of licensees is slightly higher than previously, we continue to attract good licensees when pubs become available.
We have supported our licensees as best we can in recent years, and continued to do so in the last year, as appropriate, through the energy crisis. The UK Government Energy Bills Relief Scheme provided support through the winter months. Whilst wholesale rates have now started to ease, the overall cost for utilities is estimated to remain on average twice that of before the war in Ukraine.
We continue to maintain our estate to a high level, even though the cost of repairs and maintenance has increased substantially. We plan to accelerate our external decoration schemes in the coming year.
Brewing and Brands
Total beer volumes were down -2.7%. Own brewed beer volumes were up +5.2%. This growth is driven by the brewing of Singha beer at Faversham which commenced in February 2022, and has offset the declines in cask ale and premium bottled ales, as experienced across the market.
Cost of goods inflation in beer production has been material. For example, the cost of inputs for bottled beers alone has increased in excess of GBP2m, before logistics and distribution costs. Legislative changes in packaging waste due to be introduced in 2025 will drive further inflation. We also expect higher logistics costs going forward.
We have a strong heartland on-trade business and enjoy first-class customer relations, and our customers have been generally supportive as we try to recover some of this inflationary impact through higher prices. The off-trade has proved more challenging though, after many years of strong performance.
Investment Property
As at June 2023, the Company owned investment property valued at GBP7.2m (2022: GBP6.7m). We have sold two investment properties during the period.
We continue to promote sites in the local area for potential development. We remain confident that all these schemes have considerable merit, and that at least one of these schemes will be approved in the near term, but policy changes at local and national level make others less likely in the short term.
Outlook and Current Trading
The hospitality sector has faced an unprecedented series of crises in the last three years. We still have known cost increases to absorb, but the dust is settling, the outlook is more positive and the fundamentals of the business are good.
Consumer spending has remained resilient all year, better than many had expected, and better than many other parts of the retail and consumer economy. People are prioritising going out over other types of expenditure.
Pubs are generally performing better than restaurants. Premium and neighbourhood pubs are performing well. We have an excellent pub estate with considerable potential, a loyal customer base, and a high profile within the individual communities we serve.
Shepherd Neame pubs have been performing in line with the best in the sector. All of which gives us confidence even if we go into a new phase of pressure on household budgets, as mortgage rates increase.
We do face considerable inflationary and market challenges within our Brewing and Brands business, but, notwithstanding the inflationary pressures, we have a strong core of loyal and happy customers.
After the wonderful June 2023 weather, wet, cool and windy conditions returned in July and August. This period compares with the record-breaking sunshine and heat in July 2022. Inevitably trade at our coastal sites has suffered somewhat, but was boosted by warm weather in early September. Nonetheless, trade has remained encouraging in our pubs, albeit the beer market remains challenging.
For the 13 weeks to 23 September 2023, like-for-like sales in our retail pubs were +5.6% vs the 2023 financial year 9 . For the nine weeks to 26 August 2023, same outlet like-for-like income in our tenanted pubs was up +3.0% vs 2023 9 . Total beer volumes were -10.3% vs 2023 9 . Own brewed beer volume was -15.9% vs 2023 9 .
We have much to look forward to. The balance sheet remains strong and the business has momentum in our pipeline of investment. We are confident we have the team and skills to deliver good returns for our shareholders over the long term.
Jonathan Neame
Chief Executive
Group income statement
For the 52 weeks ended 24 June 2023
52 weeks ended 24 June 52 weeks ended 25 June
2023 2022
----------------- ----- ============================================= =============================================
Items excluded Items excluded
Underlying from underlying Total Underlying from underlying Total
results results statutory results results statutory
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
1,
Revenue 2 166,267 - 166,267 151,538 - 151,538
Other income 1 - - - 383 - 383
Operating
charges 3 (152,952) (5,681) (158,633) (139,028) (2,470) (141,498)
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
1,
Operating profit 3 13,315 (5,681) 7,634 12,893 (2,470) 10,423
Net finance 1,
costs 3 (5,741) (214) (5,955) (5,599) (83) (5,682)
Fair value
movements
on financial
instruments
charged
to profit and 1,
loss 3 - 195 195 - 397 397
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
Total net
finance costs (5,741) (19) (5,760) (5,599) 314 (5,285)
Profit on
disposal of
property 3 - 3,002 3,002 - 1,709 1,709
Investment
property
fair value
movements 3 - 72 72 - 520 520
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
Profit before
taxation 7,574 (2,626) 4,948 7,294 73 7,367
Taxation 4 (1,508) 22 (1,486) (1,462) 375 (1,087)
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
Profit after
taxation 6,066 (2,604) 3,462 5,832 448 6,280
----------------- ----- ------------- ---------------- ------------ ------------- ---------------- ------------
Earnings per 50p
ordinary
share 6
Basic 23.5p 42.5p
Diluted 23.3p 42.3p
All results are derived from continuing activities.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 24 June 2023
52 weeks 52 weeks
Note ended 24 ended 25
June 2023 June 2022
GBP'000 GBP'000
---------------------------------------------- ------- ------------ ------------
Profit after taxation 3,462 6,280
Items that may be reclassified subsequently
to profit or loss:
Gains arising on cash flow hedges during the
period 2,019 2,596
Income tax relating to these items 4 (460) (561)
---------------------------------------------- ------- ------------ ------------
Other comprehensive gains 1,559 2,035
---------------------------------------------- ------- ------------ ------------
Total comprehensive income 5,021 8,315
---------------------------------------------- ------- ------------ ------------
GROUP STATEMENT OF FINANCIAL POSITION
As at 24 June 2023
Group Group
24 June 25 June
2023 GBP'000 2022 GBP'000
--------------------------------------- -------------- --------------
Non-current assets
Goodwill and intangible assets 597 375
Property, plant and equipment 279,810 274,651
Investment properties 7,166 6,716
Other non-current assets - -
Finance lease receivable 2,355 -
Right-of-use assets 41,922 44,235
---------------------------------------- -------------- --------------
331,850 325,977
--------------------------------------- -------------- --------------
Current assets
Inventories 8,001 8,067
Trade and other receivables 19,458 17,685
Cash and cash equivalents 1,444 5,579
Finance lease receivable 111 -
Assets held for sale 365 1,099
---------------------------------------- -------------- --------------
29,379 32,430
--------------------------------------- -------------- --------------
Current liabilities
Trade and other payables (28,186) (27,222)
Borrowings (1,600) (1,600)
Lease liabilities (2,987) (2,780)
---------------------------------------- -------------- --------------
(32,773) (31,602)
--------------------------------------- -------------- --------------
Net current assets/(liabilities) (3,394) 828
---------------------------------------- -------------- --------------
Total assets less current liabilities 328,456 326,805
---------------------------------------- -------------- --------------
Non-current liabilities
--------------------------------------- -------------- --------------
Lease liabilities (52,275) (53,106)
Borrowings (80,220) (79,270)
Derivative financial instruments (82) (2,353)
Deferred tax liabilities (16,909) (14,749)
---------------------------------------- -------------- --------------
(149,486) (149,478)
--------------------------------------- -------------- --------------
Net assets 178,970 177,327
---------------------------------------- -------------- --------------
Capital and reserves
Share capital 7,429 7,429
Share premium account 1,099 1,099
Revaluation reserve 31 31
Own shares (1,042) (660)
Hedging reserve 70 (1,489)
Retained earnings 171,383 170,917
---------------------------------------- -------------- --------------
Total equity 178,970 177,327
---------------------------------------- -------------- --------------
CONSOLIDATED statement of changes in equity
For the 52 weeks ended 24 June 2023
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
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 5 - - - - - (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
Profit for the
financial
year - - - - - 3,462 3,462
Gains arising on cash
flow hedges during
the year - - - - 2,019 - 2,019
Tax relating to
components
of other
comprehensive
income 4 - - - - (460) - (460)
---------------------- --------- --------- --------- ------------- ---------- ---------- ---------- ----------
Total comprehensive
income - - - - 1,559 3,462 5,021
Ordinary dividends
paid 5 - - - - - (2,811) (2,811)
Accrued share-based
payments - - - - - 39 39
Purchase of own
shares - - - (610) - - (610)
Distribution of own
shares - - - 44 - (40) 4
Unconditionally vested
share awards - - - 184 - (184) -
-------------------------- ----- --------- --------- ------------- ---------- ---------- ---------- ----------
Balance at 24 June 2023 7,429 1,099 31 (1,042) 70 171,383 178,970
-------------------------- ----- --------- --------- ------------- ---------- ---------- ---------- ----------
GrouP statement of cash flows
For the 52 weeks ended 24 June 2023
52 weeks 52 weeks
ended 24 ended 25
Note GBP'000 June 2023 GBP'000 June 2022
GBP'000 GBP'000
--------------------------------------- ------- ---------- ------------ ---------- ------------
Cash flows from operating activities
Cash generated from operations 8 20,818 21,141
Income taxes paid (199) -
---------- ----------
Net cash generated by operating
activities 20,619 21,141
Cash flows from investing activities
Proceeds from disposal of property,
plant and equipment 61 5,792
Proceeds from disposal of investment
property - 1
Proceeds from disposal of assets
held for sale 2,267 3,292
Purchases of property, equipment
and lease premiums (10,465) (5,304)
Purchase of intangible fixed
assets - (129)
Customer loan redemptions 1 -
Acquisition of subsidiaries (6,271) -
Cash acquired on acquisition 766 -
---------- ----------
Net cash generated by investing
activities (13,641) 3,652
Cash flows from financing activities
Dividends paid 5 (2,811) (520)
Interest paid (4,241) (4,436)
Payments of principal portion
of lease liabilities (4,099) (4,220)
Proceeds from/(repayment of)
borrowings 8 1,400 (15,600)
Issue costs of new long term
loans 8 (756) -
Purchase of own shares (610) -
Share option proceeds 4 2
---------- ----------
Net cash used in financing activities (11,113) (24,774)
--------------------------------------- ------- ---------- ------------ ---------- ------------
Net movement in cash and cash
equivalents (4,135) 19
Cash and cash equivalents at
beginning of the period 5,579 5,560
--------------------------------------- ------- ---------- ------------ ---------- ------------
Cash and cash equivalents at
end of the period 1,444 5,579
--------------------------------------- ------- ---------- ------------ ---------- ------------
Notes to the financial statements
24 June 2023
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 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.
52 weeks ended 24 June 2023 Brewing Retail Tenanted
and Brands Pubs Pubs Unallocated(1) Total
GBP'000 and Hotels GBP'000 GBP'000 GBP'000
GBP'000
---------------------------------------- ------------ ------------ --------- ----------------- ----------
Revenue 56,905 74,442 33,853 1,067 166,267
Other income - - - - -
---------------------------------------- ------------ ------------ --------- ----------------- ----------
Underlying operating profit/(loss) 957 8,322 12,599 (8,563) 13,315
Items excluded from underlying
results - (4,514) 52 (1,219) (5,681)
---------------------------------------- ------------ ------------ --------- ----------------- ----------
Segmental operating profit/(loss) 957 3,808 12,651 (9,782) 7,634
Net underlying finance costs (5,741)
Finance costs excluded from underlying
results (214)
Fair value movements on ineffective
element of cash flow hedges 195
Profit on disposal of property 3,002
Investment property fair value
movements 72
---------------------------------------- ------------ ------------ --------- ----------------- ----------
Profit before taxation 4,948
---------------------------------------- ------------ ------------ --------- ----------------- ----------
52 weeks ended 24 June 2023 Brewing Retail Tenanted
and Brands Pubs Pubs Unallocated Total
GBP'000 and Hotels GBP'000 GBP'000 GBP'000
GBP'000
----------------------------------- ------------ ------------ --------- -------------- ----------
Other segment information
Capital expenditure - tangible
and intangible assets 1,552 9,761 2,977 1,455 15,745
Depreciation and amortisation pre
IFRS 16 1,508 2,896 2,433 468 7,305
Depreciation and amortisation 1,640 4,678 3,252 603 10,173
Impairment of property, plant and
equipment, goodwill and assets
held for sale - 870 704 - 1,574
Impairment of right-of-use assets - 3,641 (756) - 2,885
Underlying segmental EBITDA pre
IFRS 16 2,502 9,968 14,146 (8,037) 18,579
Underlying segmental EBITDA 2,637 13,020 15,861 (7,957) 23,561
Number of pubs - 72 217 7 296
----------------------------------- ------------ ------------ --------- -------------- ----------
1. GBP1,067,000 of unallocated income (2022: GBP910,000) includes rent receivable from investment properties and other non-core trading income. Unallocated expenses primarily represent head office support costs.
52 weeks ended 25 June 2022 Brewing Retail Tenanted
and Brands Pubs Pubs Unallocated Total
GBP'000 and Hotels 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
---------------------------------------- ------------ ------------ --------- -------------- ----------
52 weeks ended 25 June 2022 Brewing Retail Tenanted
and Brands Pubs Pubs Unallocated Total
GBP'000 and Hotels 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
-------------------------------------- ------------ ------------ --------- -------------- ----------
Geographical information
An analysis of the Group's revenue by geographical market is set out below:
52 weeks 52 weeks
ended 24 ended 25
June 2023 June 2022
GBP'000 GBP'000
------------------- ------------ ------------
Revenue
UK 163,896 149,011
Rest of the World 2,371 2,527
------------------- ------------ ------------
166,267 151,538
------------------- ------------ ------------
2 Revenue
An analysis of the Group's revenue by category is as follows:
52 weeks 52 weeks
ended 24 ended 25
June 2023 June 2022
GBP'000 GBP'000
---------------------------- ------------ ------------
Sale of goods and services 157,055 142,296
Rental income 9,212 9,242
---------------------------- ------------ ------------
Revenue 166,267 151,538
---------------------------- ------------ ------------
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
24 June 25 June
2023 GBP'000 2022 GBP'000
----------------------------------------------------------- --------------- ---------------
Underlying EBITDA 23,561 23,428
Depreciation and amortisation (10,173) (10,480)
Free trade loan discounts 3 (2)
Loss on sale of assets (excluding property) (76) (53)
----------------------------------------------------------- --------------- ---------------
Underlying operating profit 13,315 12,893
----------------------------------------------------------- --------------- ---------------
Net underlying finance costs pre IFRS 16 (4,494) (4,355)
----------------------------------------------------------- --------------- ---------------
Net underlying finance costs (5,741) (5,599)
----------------------------------------------------------- --------------- ---------------
Underlying profit before taxation 7,574 7,294
Profit on disposal of properties 3,002 1,709
Investment property fair value movements 72 520
Separately disclosed operating charges:
Impairment of intangible assets, properties, right-of-use
assets and assets held for sale (4,459) (2,863)
Other operating charges excluded from underlying results (1,222) 393
Separately disclosed finance costs:
Settlement of ineffective portion of interest rate (73) -
swap
Write-off of unamortised loan fees on restructuring (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)
Fair value movements on financial instruments charged
to profit and loss 195 397
----------------------------------------------------------- --------------- ---------------
Profit before taxation 4,948 7,367
----------------------------------------------------------- --------------- ---------------
Separately disclosed operating charges
During the 52 weeks ended 24 June 2023, separately disclosed operating charges comprised:
a) An impairment charge of GBP4,459,000 in relation to 12 freehold properties and eight right-of-use assets.
b) Professional fees of GBP621,000 relating to the extension of our distribution agreement with our logistics partner.
c) Professional fees of GBP268,000 relating to two company acquisitions.
d) Professional fees of GBP64,000 relating to the transition of the pension scheme administration to an independent master trust.
e) A charge of GBP269,000 in respect of restructuring fees.
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 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.
d) Professional fees of GBP47,000 relating to two company acquisitions which completed after the year end.
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 52 weeks ended 24 June 2023, the Group settled the ineffective portion of its 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 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.
4 Taxation
a Tax on profit
52 weeks ended 24 June 52 weeks ended 25 June
2023 2022
-------------------- =============================================== ===============================================
Excluded Excluded
Tax charged to the Underlying from underlying Total Underlying from underlying Total
income results results statutory results results statutory
statement GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Current income tax
Current tax on - - - - - -
profit for
the year
Adjustments for - - - - - -
current tax
on prior periods
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Total current - - - - - -
income tax charge
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Deferred income tax
Origination and
reversal of
timing differences 1,252 53 1,305 1,462 (84) 1,378
Change in
corporation tax
rate 256 12 268 - (33) (33)
Adjustments for
current tax
on prior periods - (87) (87) - (258) (258)
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Total deferred tax
charge 1,508 (22) 1,486 1,462 (375) 1,087
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Total tax charged
to the income
statement 1,508 (22) 1,486 1,462 (375) 1,087
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Tax charged to
other comprehensive
income
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Deferred tax
Gains arising on
cash flow
hedges in the
period 458 493
Effect of increase
in future
rate of
corporation tax 46 68
Adjustments for (44) -
current tax
on prior periods
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
Total tax charged
to other
comprehensive
income 460 561
-------------------- ------------- ------------------ ------------ ------------- ------------------ ------------
b Reconciliation of the total tax charge
52 weeks 52 weeks
ended ended
24 June 25 June
2023 GBP'000 2022
GBP'000
---------------------------------------------------------- --------------- -----------
Profit before income tax 4,948 7,367
---------------------------------------------------------- --------------- -----------
Tax on Group profit at UK standard rate of corporation
tax of 20.5% (2022: 19.0%) 1,014 1,400
Expenses not deductible for tax purposes 349 151
Profit on sale of property less chargeable gains (159) (173)
Effect of a change in tax rate (267) (33)
On inception of sublease 636 -
Current and deferred tax over-provided in previous years (87) (258)
---------------------------------------------------------- --------------- -----------
Total tax charged to the income statement 1,486 1,087
---------------------------------------------------------- --------------- -----------
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. 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.
There is no expiry date on timing differences.
5 Dividends
52 weeks 52 weeks
ended ended
24 June 25 June
2023 GBP'000 2022
GBP'000
------------------------------------------------------------- --------------- -----------
Declared and paid during the year
Final dividend for 2022: 15.00p (2021: nil) per ordinary 2,227 -
share
Interim dividend for 2023: 4.00p (2022: 3.50p) per ordinary
share 584 520
------------------------------------------------------------- --------------- -----------
Dividends paid 2,811 520
------------------------------------------------------------- --------------- -----------
The Directors propose a final dividend of 16.00p (2022: 15.00p) per 50p ordinary share totalling GBP2,358,000 (2022: GBP2,227,000) for the 52 weeks ended 24 June 2023. The dividend is subject to approval by shareholders at the Annual General Meeting, to be held on 27 October 2023, and has not been included as a liability in this financial information
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 24 ended 25
June 2023 June 2022
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
Profit attributable to equity shareholders 3,462 6,280
Items excluded from underlying results 2,604 (448)
------------------------------------------------------- ------------ ------------
Underlying profit attributable to equity shareholders 6,066 5,832
------------------------------------------------------- ------------ ------------
Number Number
------------------------------------------------------- ------------ ------------
Weighted average number of shares in issue 14,746 14,784
Dilutive outstanding options 113 62
------------------------------------------------------- ------------ ------------
Diluted weighted average share capital 14,859 14,846
------------------------------------------------------- ------------ ------------
Earnings per 50p ordinary share
------------------------------------------------------- ------------ ------------
Basic 23.5p 42.5p
Diluted 23.3p 42.3p
Underlying basic 41.1p 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 113,000 (2022: 62,000) 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 underlying items and the tax attributable to those items on basic and diluted earnings per share.
7 ACQUISITION OF SUBSIDIARY UNDERTAKINGS
On 28 July 2022, the Company acquired 100% of the issued share capital East Anglia Pub Corporation Limited (EAPC), a company which owns and operates one pub in Leigh-on Sea, Essex. In addition, at the same date, as part of this transaction, the Company also agreed to buy two related pub properties. The total consideration for these related transactions was GBP4,653,000 which was all satisfied by cash. The fair value of the assets acquired at that date was GBP4,852,000 which was more than the fair value of the consideration.
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:
Book value
Book value of pub Fair
of EAPC Revaluation purchases Revaluation value
GBP'000 GBP'000 GBP'000 GBP'000 to group
GBP'000
-------------------------------- ------------- -------------- ----------- -------------- -----------
Non-current assets
Property, plant and equipment 862 1,138 1,000 1,900 4,900
Current assets
Inventories 12 - - - 12
Trade and other receivables - - - - -
Cash and cash equivalents 576 - - - 576
-------------------------------- ------------- -------------- ----------- -------------- -----------
Total assets 1,450 1,138 1,000 1,900 5,488
Trade and other payables (422) - - - (422)
Deferred tax liabilities (30) (184) - - (214)
-------------------------------- ------------- -------------- ----------- -------------- -----------
Total liabilities (452) (184) - - (636)
-------------------------------- ------------- -------------- ----------- -------------- -----------
Net assets 998 954 1,000 1,900 4,852
Balance arising on acquisition
taken to non underlying items (199)
-------------------------------- ------------- -------------- ----------- -------------- -----------
4,653
-------------------------------- ------------- -------------- ----------- -------------- -----------
Satisfied by:
Cash 4,653
-------------------------------- ------------- -------------- ----------- -------------- -----------
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.
Fair
Book value Revaluation value
GBP'000 GBP'000 to Group
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 1,618
--------------------------------- ------------- -------------- ----------
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.
8 Notes to the STATEMENT OF Cash Flows
a Reconciliation of operating profit to cash generated by operations
52 weeks ended 24 June 52 weeks ended 25 June
2023 2022
------------------------ ============================================= =============================================
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 13,315 (5,681) 7,634 12,893 (2,470) 10,423
Adjustment for:
Depreciation and
amortisation 10,173 - 10,173 10,480 - 10,480
Impairment of property,
plant and equipment - 1,516 1,516 - 1,561 1,561
Impairment of
intangible
assets - - - - 52 52
Impairment of
right-of-use
assets - 2,885 2,885 - 1,226 1,226
Impairment of assets
held
for sale - 58 58 - 24 24
Share-based payments
expense 39 - 39 183 - 183
Decrease/(increase) in
inventories 88 - 88 (747) - (747)
Increase in debtors and
prepayments (1,958) - (1,958) (2,242) - (2,242)
Increase/(decrease) in
creditors
and accruals 472 (318) 154 712 (374) 338
Loss on sale of assets
(excluding
property) 76 - 76 53 - 53
Income tax paid (199) - (199) - - -
Fair value movements on
financial assets 153 - 153 (210) - (210)
------------------------ ------------- ------------------ ---------- ------------- ------------------ ----------
Net cash inflow from
operating
activities 22,159 (1,540) 20,619 21,122 19 21,141
------------------------ ------------- ------------------ ---------- ------------- ------------------ ----------
b Reconciliation of movement in cash to movement in net debt
52 weeks 52 weeks
ended 24 ended 25
Group and Company June 2023 June 2022
GBP'000 GBP'000
------------------------------------------------ ------------ ------------
Opening cash and overdraft 5,579 5,560
Closing cash and overdraft 1,444 5,579
------------------------------------------------ ------------ ------------
Movement in cash in the period (4,135) 19
Cash from increase in bank loans (1,400) -
Cash used to repay bank loans - 15,600
Movement in loan issue costs 450 (105)
------------------------------------------------ ------------ ------------
Movement in net debt resulting from cash flows (5,085) 15,514
Net debt at beginning of the period (75,291) (90,805)
------------------------------------------------ ------------ ------------
Net debt (80,376) (75,291)
------------------------------------------------ ------------ ------------
Current lease liability (2,987) (2,780)
Non-current lease liability (52,275) (53,106)
------------------------------------------------ ------------ ------------
Statutory net debt (135,638) (131,177)
------------------------------------------------ ------------ ------------
c Analysis of net debt
Reclassification Proceeds
of long-term from Issue
June 2022 Cash loans borrowings costs Non-cash June
Group and Company GBP'000 flow GBP'000 GBP'000 of new GBP'000 2023
2023 GBP'000 loans GBP'000
GBP'000
------------------- ------------ ---------- ------------------- ------------- ---------- ----------- ----------
Cash and cash
equivalents 5,579 (4,135) - - - - 1,444
Debt due in less
than
one year (1,600) - (1,600) 1,600 - - (1,600)
Debt due after
more
than one year (79,270) - 1,600 (3,000) 756 (306) (80,220)
------------------- ------------ ---------- ------------------- ------------- ---------- ----------- ----------
Net debt (75,291) (4,135) - (1,400) 756 (306) (80,376)
------------------- ------------ ---------- ------------------- ------------- ---------- ----------- ----------
Lease liabilities (55,886) 4,099 - - - (3,475) (55,262)
------------------- ------------ ---------- ------------------- ------------- ---------- ----------- ----------
Statutory net debt (131,177) (36) - (1,400) 756 (3,781) (135,638)
------------------- ------------ ---------- ------------------- ------------- ---------- ----------- ----------
Reclassification
of long-term
June 2021 Cash loans New loans Non-cash June
Group and Company GBP'000 flow GBP'000 GBP'000 GBP'000 2022
2022 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) --------------------------- ------------ ---------- ----------------- ------------ ----------- ----------
Non-cash movements in lease liabilities comprise lease additions and modifications of GBP2,228,000 (2022: GBP699,000) and interest of GBP1,247,000 (2022: GBP1,245,000), less waivers of nil (2022: GBP164,000).
9 ACCOUNTS
The financial information for the period ended 24 June 2023 and the period ended 25 June 2022 does not constitute the Company's statutory accounts for those years.
Statutory accounts for the period ended 25 June 2022 have been delivered to the Registrar of Companies. The statutory accounts for the period ended 24 June 2023 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
The auditor's report on the statutory accounts for 24 June 2023 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 25 June 2022 was unqualified, and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.
[1] Profit before any profit or loss on disposal of properties, investment property fair value movements and charges which are either material or infrequent in nature and do not relate to the underlying performance.
[2] Underlying profit 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.
[3] Net assets at the reporting date divided by the number of shares in issue being 14,857,500 50p shares.
[4] 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.
[5] 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.
[6] Pub profit before depreciation, amortisation, rent and property costs and other cost allocations.
[7] Shepherd Neame branded, licensed, third party, customer own-label and contract beer and cider sales volumes.
[8] Shepherd Neame branded, licensed, customer own-label and contract beer and cider sales volumes.
[9] The periods referred to for financial year 2023 are the comparative month(s) of July, August & September 2022 which were during the financial year 52 weeks to 24 June 2023.
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(END) Dow Jones Newswires
September 27, 2023 02:00 ET (06:00 GMT)
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