TIDMSHEP
RNS Number : 3482K
Shepherd Neame Limited
21 September 2016
21 September 2016
SHEPHERD NEAME LIMITED
ANNOUNCEMENT OF FULL YEAR RESULTS
Shepherd Neame, Britain's Oldest Brewer, today announces results
for the 52 weeks ended 25 June 2016.
Financial performance(1) :
- Record set of results and impressive progress against strategic objectives
- Turnover increased by +1.2% to GBP139.9m (2015: GBP138.2m)
- Underlying operating profit(2) up +3.5% at GBP14.2m (2015: GBP13.8m)
- Underlying profit before tax(3) up +10.7% to GBP10.3m (2015: GBP9.3m)
- Statutory profit before tax up +4.7% to GBP14.4m (2015: GBP13.7m)
- Basic earnings per ordinary share up +13.1% to 84.0p (2015:
74.3p) and underlying basic earnings per share up +12.3% to 54.7p
(2015: 48.7p)
- Proposed final dividend per share up +3.0% to 22.05p (2015:
21.40p) making total dividends for the year of 27.50p (2015:
26.70p)
Operational highlights:
- Strong performance across our pub estate
- Like-for-like managed pub and hotel sales up +4.4%, with
liquor up +3.1%, food up +4.2% and accommodation up +11.7%
- Like-for-like tenanted EBITDAR(4) up +2.7%
- Core own and licensed beer volumes (excluding contract
brewing) up +0.3%: with excellent growth from the Whitstable Bay
Collection
- Increased investment in our pubs to GBP7.3m (2015: GBP6.5m)
and GBP2.2m (2015: GBP2.1m) in repairs and decorations
Current trading:
- In the 10 weeks to 3 September 2016 like-for-like managed
sales are up +8.2% and like-for-like EBITDAR from Tenanted pubs to
27 August is up +2.2%
- Core own and licensed beer volumes (excluding contract brewing) to 3 September up +1.2%
- Acquisition of eight pubs from Enterprise Inns plc since the year end
Jonathan Neame, Chief Executive, commented:
"I am delighted to report a record set of results, with managed
pubs our key driver of growth, and an impressive performance
against our strategic objectives.
In recent years, we have worked hard to improve the quality of
our pub estate and modernise our brand portfolio. We have created a
much stronger business with sustainable cashflows and the skills
and ambition for further growth.
We have made a good start to the new financial year, with a
particularly strong performance from our coastal pubs."
(1) First set of results prepared under new accounting standard
Financial Reporting Standard 102(FRS102)
(2) Profit before net finance costs, any profit or loss on the
disposal of properties, investment property fair value movements
and exceptional items
(3) Profit before any profit or loss on the disposal of
properties, investment property fair value movements and
exceptional items
(4) Earnings before interest, tax, depreciation, amortisation
and rent payable
For further information, please contact:
Shepherd Neame Limited
Jonathan Neame, Chief Executive Tel: 01795
Mark Rider, Finance and IT Director 532206
Kreab
Christina Clark / Venetia Stanley Tel: 020
7074 1800
/ 07776 171
210
Regional and Trade Media Contact:
John Humphreys Tel: 01795 542051
/ 07793 294 469
Note: The Directors of Shepherd Neame Limited accept
responsibility for this announcement.
NOTES FOR EDITORS
Shepherd Neame is Britain's oldest brewer. Established in 1698
and based in Faversham, Kent it employs around 1,300 people.
The Company retails its own beers, on draught and in bottles,
under a range of highly successful brand names, including:
- Spitfire: One of the leading premium bottled ales in the UK
with national distribution on draught (4.2% abv) and in bottle
(4.5% abv). Spitfire Gold, a golden ale (4.1% abv), was launched to
mark the 75(th) anniversary of the Battle of Britain and Spitfire
Lager, the Lager of Britain (4.0% abv) has been launched in
2016.
- Whitstable Bay: This range, sold under the Faversham Steam
Brewery brand, includes a Pale Ale on draught (3.9% abv) and in
bottle (4% abv), an Organic Ale (4.5% abv), Blonde Lager (4.5%
abv),Black Oyster Stout (4.2%) and Red IPA (4.5% abv).
- Bishops Finger: Connoisseur premium ale (5.4% abv).
- Master Brew: The 'Original Kentish Ale' is a well-hopped cask ale (3.7% abv).
The Company also brews lagers under license, including:
- Asahi Super Dry: Japan's number one beer (5% abv), which is
produced under an exclusive UK license for brewing, sales and
marketing.
- Samuel Adams Boston Lager: Leading US craft lager (4.8% abv)
brewed under an exclusive license from the Boston Beer Company. The
Company also imports Rebel IPA, a strong hopped US craft beer (6.5%
abv) and Angry Orchard, America's No. 1 Hard Cider (5%).
In the 26 weeks ended 26 December 2015 Shepherd Neame sold
246,000 brewers' barrels of beer (71.0 million pints) including
211,000 brewers' barrels of own brewed beer (60.6 million pints) in
the last year. The majority of these sales were made in the UK
although the Company also exports to more than 35 countries.
At the year end, the Company operated 328 pubs, of which 267
were tenanted or leased, 7 were held as investment properties under
commercial free of tie leases, and 54 managed. The pub estate
ranges from inns and hotels to destination dining, great
traditional and local community pubs.
Shepherd Neame's shares are traded on the ISDX Growth Market.
See http://www.isdx.com/ for further information and the current
share price.
For further information on the Company, see
www.shepherdneame.co.uk.
CHAIRMAN'S STATEMENT
Overview
I am pleased to report another excellent year for the Company
for the 52 weeks to 25 June 2016 with strong underlying growth.
The performance was characterised by good trading in our pub
business and impressive growth in managed pubs' profits. This has
driven strong operating cash flows which, together with exceptional
proceeds from property disposals has created additional headroom to
enable the business to grow further through pub acquisitions.
A key part of the strategy in recent years has been to modernise
various aspects of the business, to drive operational excellence
and update our brand and pub portfolio. I am delighted therefore to
be able to introduce in this annual report the Company's new brand
identity which has been developed in the last year.
Accounting Standards
This is our first full year report under the FRS 102 accounting
standard, and as a consequence we have had to restate some prior
year comparatives prepared under previous UK GAAP accounting
rules.
There are four principal areas of change: the valuation of our
assets; reporting by business segment and different accounting
treatment for both lease commitments and for interest rate swaps.
The specific impacts of these changes were set out in the
transition document on 2 March 2016, which is available at
www.shepherdneame.co.uk.
As part of this process, the Company has carried out a one-off
revaluation of a significant proportion of its assets as at 28 June
2014 and incorporated this into our balance sheet. This has
increased net assets and reduced balance sheet gearing. This
revaluation was of the Company's trading licensed freehold assets
only and excludes licensed leasehold assets and the brewery site.
Assets that are held for rental income are valued separately as
investment property at each reporting date.
Financial Performance
Turnover for the period increased by 1.2% to GBP139.9m (2015:
GBP138.2m). Underlying operating profit grew by 3.5% to 14.2m
(2015: GBP13.8m). Underlying profit before tax(1) grew by 10.7% to
GBP10.3m (2015: GBP9.3m) and statutory profit before tax is up 4.7%
to GBP14.4m (2015: GBP13.7m). Underlying basic earnings per share
are up 12.3% to 54.7p (2015: 48.7p) and basic earnings per ordinary
share are up 13.1% to 84.0p (2015: 74.3p).
Dividend
The Board is proposing a final dividend of 22.05p (2015:
21.40p), making the total dividend for the year 27.50p (2015:
26.70p), an increase of 3.0%. This represents underlying dividend
cover of 2.0 times (2015: 1.8 times) which is in line with our
stated policy following the share capital reorganisation of 2014.
We will continue to target dividend cover at or above this level in
the future. The final dividend will be paid on 14 October 2016 to
shareholders on the register at the close of business on 7 October
2016.
Cash flow and Financing
Underlying EBITDA(2) was up 4.3% to GBP21.7m (2015: GBP20.8m).
This helped fund capital expenditure in the core business of
GBP10.7m (2015: GBP9.7m), the acquisition of three new pubs and an
initial payment for the purchase of eight new pubs from Enterprise
Inns plc. This acquisition of eight pubs was completed after the
year end.
During the period we realised proceeds from property sales of
GBP11.9m (2015: GBP3.2m) of which the principal was a one-off
benefit from the sale of 10 acres of land remaining from the
Company's farming business at Queen Court, outside Faversham. As a
consequence of this disposal activity, year end net debt reduced by
GBP8.7m to GBP60.1m giving headroom against our banking facilities
of GBP19.9m plus a GBP5.0m overdraft.
[1] Profit before any profit or loss on the disposal of
properties, investment property fair value movements and
exceptional items
2 Underlying profit before tax pre net finance costs,
depreciation, amortisation, profit or loss on sale of fixed assets
excluding property and free trade loan discounts
Board of Directors
After more than 10 years of outstanding service to the Board,
Oliver Barnes and James Leigh-Pemberton have both stepped down as
Non-Executive Directors. We are delighted to welcome two new
non-executives to the Board who both enjoy distinguished careers in
their chosen fields and will bring additional expertise to the
Board.
Hilary Riva, OBE, 59, joined the Board in April 2016. Hilary has
enjoyed a successful career in fashion retailing with various
senior roles in the Arcadia Group followed by her jointly leading
the buyout of Principles, Hawkshead, Warehouse and Racing Green as
Managing Director of Rubicon Retail. Following the sale of Rubicon,
Hilary was CEO of the British Fashion Council from 2005 to 2009.
She is a Non-Executive Director at Shaftesbury plc, and at ASOS
plc, the largest online fashion retailer, amongst other roles.
Richard Oldfield, DL, 60, joined the Board in June 2016. Richard
is executive chairman of Oldfield Partners LLP, an investment
management firm managing listed equities funds. He is also a
Director of Witan Investment Trust plc and a trustee of the Royal
Marsden Cancer Charity and the Clore Duffield Foundation.
I would like to take this opportunity to thank James and Oliver
for their very significant individual contributions to the
business. They have helped to steer the Company through some
challenging times for the industry over the past 10 years and
played a big part in helping the Company to achieve the strong
position we are in today.
Following these changes, Bill Brett has been appointed Chair of
the Remuneration Committee and Richard Oldfield, Chair of the Audit
Committee.
Government and Regulation
During the year the Small Business Enterprise and Employment
Bill completed its passage through Parliament and the Statutory
Code of Practice for large pub companies (more than 500 pubs)
became law on 21 July 2016. The smaller pub companies (fewer than
500 pubs) including Shepherd Neame simultaneously introduced new
Voluntary Codes of Practice that apply to all our tenanted and
leased pubs.
As announced in 2015, the Government introduced the National
Living Wage from April 2016. The additional cost incurred by the
business in this financial year was GBP0.1m. Future increases are
due on an annual basis between now and 2020. The annual cost impact
of this and the Apprenticeship Levy is estimated to rise to GBP1.1m
by 2020. We were, however, pleased that beer duty was held level in
the Budget and that further cuts to corporation tax are
anticipated.
Summary
This has been an excellent year for the Company. The continuous
investment in our brands and significant improvement in the profile
and quality of our pub estate in recent years has transformed the
business.
The managed pub estate has been our principal engine for growth
whilst our tenanted pubs and brewing and brands deliver strong cash
generation.
Strong trading and operational cash flows, cash proceeds from
disposals and refinancing, have all helped to put the Company in a
good position to seek further growth opportunities through
acquisition. We are delighted by the purchase of eight pubs since
the year end and continue to pursue other opportunities.
We live in uncertain political and economic times and consumer
confidence is very sensitive to changes in sentiment. The outcome
of the EU Referendum in June 2016 presents a degree of legal and
economic uncertainty whilst the Government negotiates the UK's exit
and we are mindful of the possibility of a slowdown in economic
activity. Thus we retain a cautious approach at all times and focus
on making the right investment decisions for the long term.
Finally I would like to pay tribute to the dedicated and highly
talented staff who contribute so much to the success of the Company
year after year and whose efforts we rely on greatly. I would also
like to congratulate Chief Executive, Jonathan Neame on receiving
the Publican's Morning Advertiser Outstanding Industry Contribution
Award.
Miles Templeman
Chairman
CHIEF EXECUTIVE'S REVIEW
This has been another successful year for the Company. I am
delighted to report a record set of results and impressive progress
against our strategic objectives.
Over the last few years we have undertaken a series of
initiatives to refine our strategy, modernise our processes and
increase our investment to support the growth areas of the
business. In particular we have transformed the overall profile of
our pub estate by investing the proceeds of pub disposals to build
a smaller, but high-quality and well-invested tenanted business,
that is providing strong cash generation, and a managed business
that has been our key driver for growth.
This has been achieved in a year when consumer demand to eat and
drink out was impacted by long spells of wet and unseasonable
weather and, in the second half of the year, concerns about the EU
Referendum. Within our markets, when the conditions are right, such
as at times of holidays or celebration, or fine and settled
weather, trade has been very strong. The Rugby World Cup provided a
modest benefit in October 2015 and we enjoyed strong trading over
Christmas 2015. It is pleasing to note that to date since the EU
referendum vote, we have not seen a reduction in consumer spend in
our pubs.
Within our heartland, there has been increased economic activity
with momentum in house building in areas of major development such
as Ashford, the Medway Towns and Ebbsfleet Garden City.
In the UK beer market, volume recovered slightly in the year to
June 2016 with growth of +1.2%(1) (2015: -2.4%) boosted by a strong
final quarter. However, long-term trends continue to point to flat
or slow decline in alcohol consumption, with a significant shift
towards premium and craft products and increasing consumer demand
for innovation in taste and flavour.
Within this overall market context we have made good progress
towards our vision, which is to be a great British brewer and run
the best pubs. At the same time, we have been developing a new
brand identity for the business which we present for the first time
in this report. The old logo has been in use for over 20 years and
during that time the Company has changed substantially. Our beer
range is more diverse and our pub portfolio appeals to a wider
audience. We feel it is time, therefore, to introduce a more
stylish and modern presentation of the Company logo across the
business that articulates the real and original character of the
business. We plan to roll out new signage across our pubs from the
second half of the year and we will be upgrading to a more mobile
friendly Company website in December.
(1) Source: The British Beer & Pub Association (BBPA)
Tenanted and Managed Pub Operations
Overview
At the year end we operated 328 pubs and hotels (2015: 338) of
which 285 are freehold (2015: 295). Of our total pubs 54 (2015: 52)
were managed and 267 (2015: 280) were tenanted or leased and seven
(2015: six) operated under commercial free of tie leases.
In the last five years we have actively addressed the changes in
the market to reduce our exposure to small wet-led community pubs
and to take the opportunities for growth in casual dining and
accommodation. We have transformed our pub portfolio through
progressive property management, and continue to pursue every
opportunity to raise the average quality.
During this five year period, we have acquired 15 pubs and
disposed of 46. This follows a similar period of activity in the
previous five years. Since 2011, the average EBITDAR per tenanted
pub has increased by 25.6% and per managed pub by 42.2%.
Our investment focus is to seek high quality, single-site
acquisition opportunities within our heartland if they improve the
overall business or reach new markets. We also pursue opportunities
outside our historic trading area as evidenced by recent pub
purchases. We are looking to acquire sites with unique character in
landmark or high footfall locations with the potential for further
development.
During the year we acquired three new outlets, of which two are
operated as managed pubs: the Minnis Bay Bar and Restaurant and the
Anchor, Hampstead Lock, Yalding. We have now secured planning
permission to develop these sites and work will be carried out
during the coming year. The third acquisition was the Coastguard in
St. Margaret's Bay in January 2016, which opened after a
transformational development in March and is operated as a tenanted
pub.
These three acquisitions cost GBP3.3m (2015: two pubs and the
freehold of an existing pub for GBP3.4m). We have raised gross
proceeds of GBP11.9m (2015: GBP3.2m) from the disposal of 13 pubs
(2015: 11 pubs) and seven unlicensed properties and land holdings
(2015: one unlicensed property), of which the largest was the 10
acres of land at Queen Court, outside Faversham, sold for
GBP7.4m.
Since the year end, we have acquired eight freehold pubs in
Kent, Sussex and Surrey from Enterprise Inns plc that are operated
under leases. These are all high-quality pubs and will benefit from
further investment. The pubs are: the Chequer Inn in Steyning, West
Sussex; the Crown and Anchor in Shoreham by Sea, West Sussex; Earls
in Maidstone, Kent; the Farm House in West Malling, Kent; The
Greyhound in Keston, Kent; Hen and Chickens in Bisley, Surrey; The
Kings Head in Guildford, Surrey and The Sussex Oak in Warnham, West
Sussex.
Also since the year end, the Company has acquired UES Ltd, a
successful business owned and managed by Dan Sidders and Gareth
Finney, who operated five of our existing pubs in Faversham and
Canterbury under tenancy. All five of these pubs have transferred
to the managed estate and a further pub, the Cock and Woolpack in
Finch Lane, London EC3, has been transferred from tenancy.
The combined investment in these two acquisitions (both of which
completed in July 2016) was GBP13.4m and as a result there will be
an increase in net debt in 2017.
Pub Strategy
Our pub strategy is built around three strategic pillars:
-- To drive footfall to our pubs
-- To develop our offer to enhance the customer experience
-- To attract, retain and develop the best people
Driving footfall to our Pubs
We aim to drive footfall by designing and developing unique pubs
and hotels with a 'wow' factor.
In addition to the new pub acquisitions we have invested GBP7.3m
(2015: GBP6.5m) in improving the look and feel of our pubs and
GBP2.2m (2015: GBP2.1m) in repairs and decorations.
In the managed estate, major developments during the year have
included a GBP1.2m redevelopment of the Ship & Trades in
Chatham Maritime to create 15 stylish rooms and a superb restaurant
overlooking the marina. In addition, a GBP0.7m extension to the
restaurant at the Royal Albion in Broadstairs has added more
restaurant covers with sea views. Initial trade in both outlets
since re-opening has been strong.
In the tenanted estate, we have carried out major developments
at a number of sites including the Poyntz Arms, East Molesey; the
White Horse in Maldon; the William the Conqueror, Rye Harbour and
the Adelaide, Teddington.
Developing our offer to enhance the customer experience
We aim to enhance the customer experience in our pubs by
delivering great fresh food, providing accommodation of character,
and offering an interesting range of products.
Our food continues to provide good growth in the business. In
the managed estate, footfall from diners increased by +7.7% (2015:
+9.6%) and spend per head by +3.9% (2015: +0.3%) to GBP11.96 (2015:
GBP11.51).
We continue to develop initiatives to drive the quality of our
menus and food presentation. With Dan and Gareth joining us
following the acquisition of UES Ltd, we have strengthened the
skills and resources in this area to serve a larger managed pub
estate. We have upgraded till and back office systems to enable
improved booking and table management at the Ship & Trades,
Chatham Maritime as a pilot for a potential future roll-out.
During the year we have refurbished 39 bedrooms across the
managed estate (2015: 68) and now offer a total of 283 rooms (2015:
279) presented to a very high standard. In the coming year we will
add 11 rooms at the Ostrich in Colnbrook. Occupancy remained at the
record high of 78% (2015: 78%) whilst RevPAR continued to grow by
+8.6% (2015: +11.5%) to GBP63 (2015: GBP58).
Wine volume in our pubs has been good throughout the year. We
have updated our popular AƱuela and Mezzora ranges and expanded our
supply of local quality English wines. Spirits too have seen a
resurgence as we have introduced more premium, stylish and craft
products. We have enhanced our range of premium mixers and local
juices. All these actions strengthen the experience for those
drinking or eating in our pubs.
Attracting, retaining and developing the best people
We aim to attract, retain and develop the best people, by
understanding the potential in everyone, inspiring them to achieve
their goals, and by building the loyalty and engagement of our
licensees, through the professionalism of the support we
provide.
In our managed estate we have appointed five head chefs to act
as mentors, recruited an additional field trainer and further
developed staff skills through e-learning. Our tenanted estate was
fully let at the year end with new licensees being required for
less than 6% of the total estate. Retention levels are rising as
the quality of facility and level of support makes our tenanted
offer increasingly commercially attractive.
I was particularly pleased that the Company scored strongly
against a range of measures in an independent survey of pub
companies. We were also finalists in the Publican Awards Best
Tenanted and Leased Pub Company (201+ sites) and in the Best Food
Offer (51+ sites).
The Shepherd Neame Pub Awards continue to recognise excellence
in a variety of aspects and every year the standards reach higher
levels. I would like to congratulate all this year's winners, in
particular Lee Walker of the Britannia in Guildford who won the Pub
of the Year Award and Robert and Donna Taylor at the Compasses in
Crundale who won the Tenanted Pub of the Year and numerous national
accolades. Particular mention should go to Steve and Phil Harris at
the Sportsman at Seasalter who won the National Restaurant of the
Year 2016 and Gastro Pub of the Year, a remarkable achievement.
Trading Performance
We have consistently pursued a strategy to invest in our pubs
and this has resulted in a strong trading performance this year on
the back of several years of sustained growth.
Total divisional turnover in the managed estate grew by +9.8% to
GBP48.1m (2015: GBP43.8m) and divisional underlying operating
profit grew by +13.7% to GBP7.6m (2015: GBP6.7m). Same outlet
like-for-like sales grew by +4.4% (2015: +6.1%) with liquor +3.1%
(2015: +4.3%), food +4.2% (2015: +7.0%) and accommodation +11.7%
(2015: +13.8%). Average EBITDAR per managed pub grew by +1.0%
(2015: +7.1%).
Total divisional turnover in the tenanted and leased estate grew
by +0.3% to GBP33.5m (2015: GBP33.4m) on 13 fewer outlets.
Divisional underlying operating profit was GBP12.6m (2015:
GBP12.8m). Like-for-like EBITDAR per tenanted pub grew by +2.7%
(2015: +2.4%). Average EBITDAR per tenanted pub grew by +6.4%
(2015: +4.1%).
Brewing and Brands
Overview
The Brewing and Brands business absorbed the first full year
costs of the water treatment plant and the final impact of the loss
of the Kingfisher contract. After a disappointing first half,
performance improved in the second half with some excellent
distribution gains.
The UK beer market has seen significant changes in recent years
as the growing demand for local products with wider taste and
flavour profiles has led to a rapid expansion in the number of
micro and craft brewers entering the market even though overall
beer consumption is broadly flat. Shepherd Neame has responded well
to this challenge and built an enviable portfolio of great beers
such as Spitfire, Bishops Finger, the Whitstable Bay and Classic
Collections.
Brewing and Brands Strategy
Our Brewing and Brands Strategy is built on two strategic
pillars:
-- To create demand and build awareness for our brands
-- To attract, retain and develop the best people.
Creating demand and building awareness for our brands
We aim to create demand and build awareness for our brands by
developing a range of distinctive beers, instilling a passion for
quality and having great engagement with our customers.
Recent range developments have proved to be very successful. In
particular, the Whitstable Bay Collection enjoyed excellent growth,
with a strong performance from Whitstable Bay Blonde Lager. I am
particularly pleased that our Whitstable Bay design and brand
development has won a 2016 Brand Effectiveness Award.
The Spitfire brand has performed better in the last year but
still experienced a modest decline. The portfolio has been
significantly enhanced by the successful launch of Spitfire Gold in
the early part of the year and Spitfire Lager, the Lager of
Britain, towards the end.
Our Heritage beers have performed well again, in particular the
Classic Collection brews such as Double Stout and IPA.
The licensed portfolio has continued to do well with
accelerating growth from Samuel Adams Boston Lager as we have won
some distribution gains in high-profile restaurant groups and
another strong performance from Asahi Super Dry. Angry Orchard,
America's No.1 Hard Cider, has made an encouraging start since
launch.
Shepherd Neame has been brewing and selling Asahi Super Dry
under licence in the UK for more than 10 years with an existing
contract in place to the end of 2017. The proposed purchase of the
Peroni, Grolsch and Meantime Brewing businesses by Asahi Group
Holdings is subject to shareholder approval and we remain in
discussions with Asahi over the future of our partnership.
The investment focus in the last year has been to modernise the
Brewhouse. After more than 100 years, our wooden mash tuns have
been replaced and we have embarked on a major refurbishment of the
fabric of our historic brewery buildings. Simultaneously we have
replaced the glycol system and upgraded our quality processes. All
these initiatives will help drive ever higher standards of quality
and consistency, and I am particularly pleased that since the year
end we have won seven awards for our brewing and bottling
quality.
Attracting, retaining and developing the best people
During the last year we have strengthened the brewing and
laboratory management team. In addition, we have developed our
management training and enhanced our programme to improve
communication across the business and awareness of the Company's
strategic aims and objectives. The annual Shepherd Neame Employee
Awards help to focus and reward those that have achieved the
standards we require. We have successfully raised the knowledge of
brewing and beer styles across the Company through our Love Beer
programme.
Trading Performance
Divisional turnover for the year was down -4.1% to GBP57.3m
(2015: GBP59.7m), of which Kingfisher accounted for almost all of
the decline. Total own brewed beer sold was down -6.2% (2015:
-8.4%). Own beer volume excluding contract showed modest growth at
+0.3% (2015: +0.1%). Divisional underlying operating profit was
GBP1.5m (2015: GBP1.8m). Cash generation in this part of the
business remained robust.
Current Trading
We have made a good start to the new financial year, with a
particularly strong performance from our coastal pubs during the
fine summer weather. Recent pub investments have performed well and
our newly acquired outlets have been integrated into the business
and are performing in line with expectation.
For the 10 weeks to 3 September 2016 like-for-like managed sales
are up +8.2% (2015: +6.5%), like-for-like EBITDAR in the tenanted
estate to 27 August is up +2.2% (2015: +1.8%). Total beer volume is
up +1.1% (2015: -3.8%) with own beer volume excluding contract up
+1.2% (2015: +8.6%).
Summary
We have ended the year with a strong financial performance, with
opportunities to drive further growth in the business.
We have worked hard in recent years to improve the quality of
our pub estate and modernise our brand portfolio. We have created a
much stronger business with sustainable cash flows and the skills
and ambition for further growth. The launch of our new brand
identity will present some exciting opportunities to strengthen our
engagement with consumers in the year ahead.
General political and economic uncertainty is likely to continue
for the next few years as a consequence of the UK's exit from the
European Union, but Shepherd Neame, with its strong UK focus, is
well positioned to withstand the impact. We will continue to invest
for the long term to deliver against our aims to be a great British
brewer and to run the best pubs.
Jonathan Neame
Chief Executive
Profit and loss account
52 weeks ended 25 June 2016
52 weeks to 25 June 52 weeks to 27 June
2016 2015
Items Items
excluded excluded
from from
Underlying underlying Total Underlying underlying Total
results results statutory results results statutory
note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Turnover 1,2 139,890 - 139,890 138,237 - 138,237
Operating charges 3 (125,655) (495) (126,150) (124,479) (63) (124,542)
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Operating profit 1 14,235 (495) 13,740 13,758 (63) 13,695
Net finance costs (3,898) - (3,898) (4,424) - (4,424)
Profit on disposal
of property 3 - 4,235 4,235 - 354 354
Investment property
fair value movements 3 - 282 282 - 4,086 4,086
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Profit on ordinary
activities before
taxation 10,337 4,022 14,359 9,334 4,377 13,711
Taxation 4 (2,254) 314 (1,940) (2,134) (600) (2,734)
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Profit after taxation 8,083 4,336 12,419 7,200 3,777
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Earnings per 50p
ordinary share
Basic 6 84.0p 74.3p
Underlying basic 6 54.7p 48.7p
Diluted 6 83.4p 73.8p
----------------------- ----- ----------- ------------ ----------- ----------- ------------ -----------
Statement of comprehensive income
52 weeks ended 25 June 2016
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
note GBP'000 GBP'000
------------------------------------- ----- --------- ---------
Profit after taxation 12,419 10,977
------------------------------------- ----- --------- ---------
Losses arising on cash flow hedges
during the period (5,887) (2,263)
Tax relating to components of other
comprehensive income 4 1,521 453
------------------------------------- ----- --------- ---------
Other comprehensive losses (4,366) (1,810)
------------------------------------- ----- --------- ---------
Total comprehensive income 8,053 9,167
------------------------------------- ----- --------- ---------
Balance sheet
As at 25 June 2016
25 June 27 June
2016 2015
------------------------------------------
GBP'000 GBP'000
--------------------------------------- --------- ---------
Fixed assets
Tangible fixed assets 279,872 279,247
Investments and loans 333 713
------------------------------------------ --------- ---------
280,205 279,960
--------------------------------------- --------- ---------
Current assets
Stocks 6,580 7,001
Debtors 18,114 16,103
Deferred tax asset
due after one year 4,409 3,965
Cash 90 6,793
------------------------------------------ --------- ---------
29,193 33,862
--------------------------------------- --------- ---------
Creditors: amounts falling due within
one year
Bank loans and overdrafts (727) (1,987)
Creditors (26,703) (24,156)
------------------------------------------ --------- ---------
(27,430) (26,143)
--------------------------------------- --------- ---------
Net current assets 1,763 7,719
------------------------------------------ --------- ---------
Total assets less current liabilities 281,968 287,679
Creditors: amounts falling due after
more than one year
Bank loans (59,439) (73,592)
Derivative financial instruments (23,670) (17,783)
Deferred lease liability (1,831) (1,640)
Provision for liabilities (13,151) (14,838)
------------------------------------------ --------- ---------
Net assets 183,877 179,826
------------------------------------------ --------- ---------
Capital and reserves
Called-up share capital 7,429 7,429
Share premium account 1,099 1,099
Revaluation reserve 73,253 72,430
Reserve for own shares held (915) (827)
Hedging reserve (19,288) (14,226)
Profit and loss account 122,299 113,921
------------------------------------------ --------- ---------
Equity shareholders' funds 183,877 179,826
------------------------------------------ --------- ---------
These accounts for Shepherd Neame Limited (Registered in England
number 138256) were approved by the Board of Directors on 14
September 2016 and were signed on its behalf by:
Miles Templeman
Jonathan Neame
Directors
Statement of changes in equity
52 weeks ended 25 June 2016
Profit
Own and Total
Share Share Revaluation shares Hedging loss
capital premium reserve held reserve account
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Balance at 28 June
2014 as previously
stated 7,429 1,099 13,125 (908) - 108,006 128,751
Changes on transition
to FRS102 - - 60,167 - (12,416) (1,985) 45,766
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Balance at 28 June
2014 as restated 7,429 1,099 73,292 (908) (12,416) 106,021 174,517
Profit for the financial
year - - - - - 10,977 10,977
Losses arising on
cash flow hedges during
the year - - - - (2,263) - (2,263)
Tax relating to components
of other comprehensive
income - - - - 453 - 453
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Total comprehensive
income - - - - (1,810) 10,977 9,167
Ordinary dividends
paid - - - - - (3,861) (3,861)
Transfer of realised
revaluation - - (862) - - 862 -
Accrued share-based
payments - - - - - 425 425
Purchase of own shares - - - (465) - - (465)
Distribution of own
shares - - - 405 - (362) 43
Unconditionally vested
share awards - - - 141 - (141) -
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Balance at 27 June
2015 7,429 1,099 72,430 (827) (14,226) 113,921 179,826
Profit for the financial
year - - - - - 12,419 12,419
Losses arising on
cash flow hedges during
the year - - - - (5,887) - (5,887)
Tax relating to components
of other comprehensive
income - - 696 - 825 - 1,521
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Total comprehensive
income - - 696 - (5,062) 12,419 8,053
Ordinary dividends
paid - - - - - (3,977) (3,977)
Transfer of realised
revaluation - - 127 - - (127) -
Accrued share-based
payments - - - - - 528 528
Purchase of own shares - - - (584) - - (584)
Distribution of own
shares - - - 359 - (328) 31
Unconditionally vested
share awards - - - 137 - (137) -
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Balance at 25 June
2016 7,429 1,099 73,253 (915) (19,288) 122,299 183,877
---------------------------- --------- --------- ------------ -------- --------- --------- --------
Cash flow statement
52 weeks ended 25 June 2016
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- --------- ---------
Net cash flows from operating
activities (see note 6a) 20,293 21,375
Cash flows from investing
activities
Proceeds of sale of tangible
fixed assets 11,893 3,155
Purchase of tangible fixed
assets (15,391) (13,165)
Additional loans to customers (21) (52)
Customer loan redemptions 245 173
--------- ---------
Net cash flows from investing
activities (3,274) (9,889)
Cash flows from financing
activities
Dividends paid (3,977) (3,861)
Interest paid (3,904) (4,391)
Repayment of long-term loan (16,000) (2,000)
Issue costs of new long-term
facility (313) -
Purchase of own shares (287) (465)
Share option proceeds 32 43
Net cash flows from financing
activities (24,449) (10,674)
-------------------------------- --------- --------- --------- ---------
Net (decrease)/increase
in cash and cash equivalents (7,430) 812
-------------------------------- --------- --------- --------- ---------
Cash and cash equivalents
at beginning of the period 6,793 5,981
-------------------------------- --------- --------- --------- ---------
Cash and cash equivalents
at end of the period (637) 6,793
-------------------------------- --------- --------- --------- ---------
Notes to the accounts
25 June 2016
1 Segmental reporting
In adopting FRS 102, the operating segment disclosure
requirements of IFRS 8 are required as the Company has publically
traded equity instruments. The standard is applied retrospectively.
The accounting policy for identifying segments is based on internal
management reporting information that is regularly reviewed by the
chief operating decision-maker.
The Company 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 the
customers:
-- Brewing and Brands which comprises the brewing, marketing and
sales of beer, wine and spirits;
-- Managed Pubs and Hotels which comprises managed pubs and
managed hotels and;
-- Tenanted and Leased Pubs which comprises pubs operated by
third parties under tenancy or lease agreements.
Transfer prices between operating segments are set on an arm's
length basis.
The measurement policies the Company uses for segment reporting
under IFRS 8 are the same as those used in the financial
statements.
Brewing Managed Tenanted
and Pubs and Leased
Brands and Hotels Pubs Unallocated Total
52 weeks ended 25 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
--------------------------------- -------- ------------ ------------ ------------ --------
Turnover 57,267 48,062 33,509 1,052 139,890
--------------------------------- -------- ------------ ------------ ------------ --------
Underlying operating profit 1,479 7,581 12,598 (7,423) 14,235
Exceptional items - - (307) (188) (495)
--------------------------------- -------- ------------ ------------ ------------ --------
Divisional operating profit 1,479 7,581 12,291 (7,611) 13,740
Net finance costs (3,898)
Profit on disposal of
property 4,235
Investment property fair
value movements 282
--------------------------------- -------- ------------ ------------ ------------ --------
Profit on ordinary activities
before taxation 14,359
--------------------------------- -------- ------------ ------------ ------------ --------
Other segment information
Capital expenditure -
tangible fixed assets 2,374 6,055 6,774 436 15,639
Depreciation 2,172 2,016 2,028 899 7,115
Underlying divisional
EBITDA 3,880 9,677 14,642 (6,521) 21,678
Number of pubs - 54 267 7 328
Brewing Managed Tenanted
and Pubs and Leased
Brands and Hotels Pubs Unallocated Total
52 weeks ended 27 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015
--------------------------------- -------- ------------ ------------ ------------ --------
Turnover 59,718 43,759 33,424 1,336 138,237
--------------------------------- -------- ------------ ------------ ------------ --------
Underlying operating profit 1,823 6,665 12,751 (7,481) 13,758
Exceptional items - - (63) - (63)
--------------------------------- -------- ------------ ------------ ------------ --------
Divisional operating profit 1,823 6,665 12,688 (7,481) 13,695
Net finance costs (4,424)
Profit on disposal of
property 354
Investment property fair
value movements 4,086
--------------------------------- -------- ------------ ------------ ------------ --------
Profit on ordinary activities
before taxation 13,711
--------------------------------- -------- ------------ ------------ ------------ --------
Brewing Managed Tenanted
and Pubs and Leased
Brands and Hotels Pubs Unallocated Total
52 weeks ended 27 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015
--------------------------- -------- ------------ ------------ ------------ --------
Other segment information
Capital expenditure -
tangible fixed assets 1,827 6,382 4,180 625 13,014
Depreciation 2,306 1,825 1,958 722 6,811
Underlying divisional
EBITDA 4,368 8,464 14,709 (6,757) 20,784
Number of pubs - 52 280 6 338
Geographical information
An analysis of the Company's turnover by geographical market is
set out below:
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
------------------- --------- ---------
UK 137,424 134,966
Rest of the World 2,466 3,271
------------------- --------- ---------
139,890 138,237
------------------- --------- ---------
2 Turnover
An analysis of the Company's turnover is as follows:
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
---------------------------- --------- ---------
Sale of goods and services 131,253 129,531
Rental income 8,637 8,706
---------------------------- --------- ---------
139,890 138,237
---------------------------- --------- ---------
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 Company. The Directors believe that
the "underlying operating profit", "underlying profit before tax",
"underlying basic earnings per share", "underlying earnings before
interest, tax, depreciation, and amortisation" presented provide a
clear and consistent presentation of the underlying performance of
ongoing business for shareholders. Underlying profit is not defined
by FRS 102 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
-- Exceptional items - these are items which are either material
or infrequent in nature and do not relate to the underlying
performance.
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Underlying EBITDA 21,678 20,784
Depreciation (7,115) (6,811)
Free trade loan discounts (113) (136)
Loss on sale of assets (excluding property) (215) (79)
----------------------------------------------- --------- ---------
Underlying operating profit 14,235 13,758
Net finance costs (3,898) (4,424)
----------------------------------------------- --------- ---------
Underlying profit before tax 10,337 9,334
Profit on disposal of properties 4,235 354
Investment property fair value movements 282 4,086
Exceptional items (495) (63)
----------------------------------------------- --------- ---------
Profit on ordinary activities before taxation 14,359 13,711
----------------------------------------------- --------- ---------
Exceptional items of GBP495,000 for the 52 weeks ended 25 June
2016 comprised an impairment charge of GBP307,000, legal and
professional fees of GBP71,000 for the Consumer Credit
Authorisation application, required by the Financial Conduct
Authority; and GBP117,000 for the professional fees related to the
transition for reporting under FRS 102. The charge of GBP63,000 for
the 52 weeks ended 27 June 2015 relates to impairment of tangible
fixed assets.
4 Taxation
a Tax on profit on ordinary activities
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
Tax charged to profit and loss GBP'000 GBP'000
------------------------------------------------ --------- ---------
Current tax
UK Corporation tax at 20.0% (2015: 20.75%) 2,573 2,270
Prior year under/(over) provision 25 (19)
------------------------------------------------ --------- ---------
Total current tax 2,598 2,251
------------------------------------------------ --------- ---------
Deferred tax
Origination and reversal of timing differences 40 493
Effect of reduction in the rate of corporation
tax (698) -
Adjustments in respect of prior years - (10)
------------------------------------------------ --------- ---------
Total deferred tax (658) 483
------------------------------------------------ --------- ---------
Total tax charged to profit and loss 1,940 2,734
------------------------------------------------ --------- ---------
Tax charged to other comprehensive income
------------------------------------------------ --------- ---------
Deferred tax
Losses arising on cash flow hedges in
the period (1,177) (453)
Effect of reduction in the rate of corporation
tax (344) -
------------------------------------------------ --------- ---------
Total tax charged to other comprehensive
income (1,521) (453)
------------------------------------------------ --------- ---------
b Reconciliation of the total tax charge
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Profit on ordinary activities before tax 14,359 13,711
------------------------------------------------ --------- ---------
UK corporation tax at average statutory
rate 20.0% (2015: 20.75%) 2,872 2,845
Expenses not deductible for tax purposes 7 68
Profit on sale of property less chargeable
gains (266) (150)
Effect of reduction in the rate of corporation
tax (698) -
Prior year under/(over) provision 25 (29)
------------------------------------------------ --------- ---------
Total tax charge to profit and loss 1,940 2,734
------------------------------------------------ --------- ---------
c Factors that may affect future tax charges
During the period the Finance Act 2015 received Royal Assent.
The main impact was the reduction of the UK Corporation tax rate
from 20% to 19% (effective from 1 April 2017) and 18% (effective
from 1 April 2020). To the extent that these rate changes will
affect the amount of future tax cash tax payments to be made by the
Company, this will reduce the size of both the Company's deferred
tax liability and tax asset. The impact in the 52 weeks to 25 June
2016 was an exceptional credit to profit and loss of GBP698,000 and
a credit to other comprehensive income of GBP344,000. A further
reduction in the UK corporation tax rate from 1 April 2020 to 17%
has been announced but has not yet been substantively enacted.
During the 52 weeks beginning 26 June 2016, the net reduction of
deferred tax liabilities expected to be credited to the profit and
loss account is estimated at GBP500,000 due to the reversal of
accelerated capital allowances and reduction in the deferred tax
liability on the revaluation of freehold pubs.
There is no expiry date on timing differences.
5 Dividends
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
----------------------------------------- --------- ---------
Declared and paid during the year
Final dividend for 2015: 21.4p (2014:
20.75p) per ordinary share 3,168 3,074
Interim dividend for 2016: 5.45p (2015:
5.30p) per ordinary share 809 787
----------------------------------------- --------- ---------
Dividends paid 3,977 3,861
----------------------------------------- --------- ---------
The Directors propose a final dividend of 22.05p (2015: 21.40p)
per 50p ordinary share totalling GBP3,269,000 (2015: GBP3,168,000)
for the year
ended 25 June 2016. The dividend is subject to approval by the
shareholders at the Annual General Meeting, to be held on 14
October 2016
and has not been included as a liability in these financial
statements, as it has not yet been approved or paid.
Shares held by the Company (and not allocated to employees under
the Share Incentive Plan) are treated as cancelled when calculating
dividends and earnings per share.
6 Earnings per share
52 weeks 52 weeks
ended ended
25 June 27 June
2016 2015
GBP'000 GBP'000
-------------------------------------------- --------------------- ---------------------
Profit attributable to equity shareholders 12,419 10,977
Items excluded from underlying results (4,336) (3,777)
-------------------------------------------- --------------------- ---------------------
Underlying earnings attributable to equity
shareholders 8,083 7,200
Number Number
-------------------------------------------- --------------------- ---------------------
Weighted average number of shares in issue 14,779 14,770
Dilutive outstanding options 113 113
-------------------------------------------- --------------------- ---------------------
Diluted weighted average share capital 14,892 14,883
-------------------------------------------- --------------------- ---------------------
Basic 84.0p 74.3p
Underlying basic 54.7p 48.7p
Diluted 83.4p 73.8p
-------------------------------------------- --------------------- ---------------------
The earnings per share calculation is based on earnings from
continuing operations and on the weighted average ordinary share
capital which excludes shares held by trusts in respect of employee
incentive plans and options.
6 Notes to the cash flow statement
a Reconciliation of operating profit to cash generated by
operations
52 weeks ended 52 weeks ended
25 June 2016 27 June 2015
Excluded Excluded
from from
Underlying underlying Underlying underlying
results results Total results results Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----------- ------------ -------- ----------- ------------ --------
Operating profit 14,235 (495) 13,740 13,758 (63) 13,695
Adjustment for:
Depreciation and amortisation 7,115 - 7,115 6,811 - 6,811
Impairment provision - 307 307 - 63 63
Charge for share-based
payments credited to
reserves 528 - 528 425 - 425
Decrease/(increase) in
stocks 421 - 421 (584) - (584)
(Increase)/decrease in
debtors and prepayments (1,978) - (1,978) 2,083 - 2,083
Increase/(decrease) in
creditors and accruals 2,131 - 2,131 1,548 (597) 951
Free trade loan discounts 113 - 113 136 - 136
Loss on sale of assets
(excluding property) 215 - 215 79 - 79
Interest received 14 - 14 13 - 13
Income tax paid (2,313) - (2,313) (2,297) - (2,297)
------------------------------- ----------- ------------ -------- ----------- ------------ --------
Net cash inflow/(outflow)
from operating activities 20,481 (188) 20,293 21,972 (597) 21,375
------------------------------- ----------- ------------ -------- ----------- ------------ --------
b Analysis of net debt
Issue Amortisation
Repayment costs of issue
Cash of long-term of new costs
2015 flow loan loan 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- -------- -------------- -------- ------------- ---------
Cash 6,793 (6,703) - - - 90
Bank overdraft - (727) - - - (727)
---------------------------- --------- -------- -------------- -------- ------------- ---------
Cash and cash equivalents 6,793 (7,430) - - - (637)
Debt due
within one
year (1,987) - 2,000 - (13) -
---------------------------- --------- -------- -------------- -------- ------------- ---------
4,806 (7,430) 2,000 - (13) (637)
Debt due after
more than one year (73,592) - 14,000 313 (160) (59,439)
----------------------------- --------- -------- -------------- -------- ------------- ---------
Total (68,786) (7,430) 16,000 313 (173) (60,076)
---------------------------- --------- -------- -------------- -------- ------------- ---------
7 Accounts
The financial information set out above does not constitute the
Company's statutory accounts for the 52 weeks ended 25 June 2016 or
52 weeks ended 27 June 2015 but is derived from those accounts.
Statutory accounts for 2015 have been delivered to the Registrar of
Companies and those for 2016 will be delivered following the
Company's annual general meeting. The auditors have reported on
those accounts; their reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under s498(2) or (3) of
the Companies Act 2006.
The preliminary announcement is prepared on the same basis as
set out in the previous year's annual accounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URSURNOAKUAR
(END) Dow Jones Newswires
September 21, 2016 02:00 ET (06:00 GMT)