Shepherd Neame Ltd - Interim Results London Stock Exchange
RNS Number : 4474G
Shepherd Neame Limited
04 March 2015
 

4 March 2015

SHEPHERD NEAME LIMITED

ANNOUNCEMENT OF INTERIM RESULTS

 

Shepherd Neame, the Kent-based brewer and pub operator, today announces results for the 26 weeks ended 27 December 2014.

 

Highlights include:

 

·     Strong performance across pub and hotel estate

-  Managed house like-for-like sales up 6.8% (2013: +7.5%), with liquor up 4.9%, food up 7.8% and accommodation up 14.5%

-  Tenanted like-for-like EBITDAR1 up 3.4% (2013: +1.5%) and average EBITDAR per pub up 4.0% (2013: +4.4%)

·     Turnover up 1.5% to £73.5m (2013: £72.5m)

·     Operating profit before exceptionals up 4.2% to £7.1m (2013: £6.8m)

·     Statutory profit before tax up 22.7% to £5.0m (2013: £4.1m)

·     Basic earnings per share up 15.6% to 26.7p(2013: 23.1p2)

·     Interim dividend increased to 5.30p per share (2013: 5.15p per £1 share)

 

1 Earnings before interest, tax, depreciation, amortisation and rent payable

2 Prior year comparative has been restated for the share capital reorganisation

 

Jonathan Neame, Chief Executive, commented:

 

"I am pleased to report strong trading across the business, particularly in our inns and hotels, and good like-for-like performance in the tenanted estate. There has been a higher quality mix of pub revenues and greater share of own beer volume and it is pleasing to note that operating margin before exceptional items increased by 0.3% in the period. We are pursuing a consistent long-term strategy to build the quality of our pub portfolio and brand assets."

 

 

 FOR FURTHER INFORMATION PLEASE CONTACT:

 

Shepherd Neame Limited

Jonathan Neame, Chief Executive

Miles Templeman, Chairman

 

Tel:  01795 532206

Tel:  01795 532206

Kreab

Marc Cohen / Christina Clark

 

Tel:  020 7074 1800

REGIONAL & TRADE MEDIA CONTACT:

John Humphreys

 

Tel:  01795 542051

Note:  The Directors of Shepherd Neame Limited accept responsibility for this announcement.

 

NOTES FOR EDITORS 

 

Shepherd Neame is a regional brewer and pub owner based in Faversham, Kent.  Established in 1698, it is Britain's oldest brewer and employs around 1,200 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) - supported by an Armstrong and Miller 'Bottle of Britain' advertising campaign.

 

§ Bishops Finger: Connoisseur premium ale (5.4% abv), nationally distributed in all major supermarkets - one of the country's leading specialist ales. 

 

§ Whitstable Bay: Sold under the Faversham Steam Brewery brand, this is a collection of stylish, modern beers which appeal to pubs, restaurants and bars. The range includes a Pale Ale, an Organic Ale, Blonde Lager and Black Oyster Stout.

 

§ Master Brew: The 'Original Kentish Ale' is a well-hopped cask ale (3.7% abv) mainly sold in Kent.

 

The Company also brews lagers under licence:

 

§ Asahi Super Dry: Japan's number one beer (5% abv), which is produced under an exclusive UK licence for brewing, sales and marketing.

 

§ Samuel Adams Boston Lager: Full-flavoured (and number one) US craft lager (4.8% abv) brewed under licence from the Boston Beer Company.

 

§ Oranjeboom Pilsener: Lager brewed under licence from United Dutch Breweries (3.9% abv), with wide distribution via the Company's own pubs.

 

In the 26 weeks ended 27 December 2014 Shepherd Neame sold 146,000 brewers' barrels of beer (42.0 million pints) including 127,000 brewers' barrels of own brewed beer (36.6 million pints). The majority of these sales were made in the UK although the Company also exports to more than 35 countries including Sweden, Italy, Ireland, the United States and Canada.

 

At the half year end, the Company operated 347 pubs, of which 297 were tenanted or leased and 50 managed. The pub estate ranges from mainstream city centre pubs to food-focused destination houses, from hotels to historic coaching inns and traditional community 'locals'.

 

Shepherd Neame's shares are traded on ISDX. 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 

 

 

Results

 

I am pleased to report another good performance for the company for the 26 weeks to 27 December 2014.

 

The period is characterised by further strong trading in our managed houses, in particular the inns and hotels, and good like-for-like performance in the tenanted estate, offset by a small decline in total beer volume as the Kingfisher contract comes to an end.

 

These combined factors result in only modest turnover growth but a higher quality mix of pub revenues and greater share of own beer volume. The Board is focussed on investing in our pub and brand assets to drive higher returns and it is pleasing to note that operating margin before exceptional items increased by 0.3% to 9.7% during the period.

 

Turnover during the period increased by 1.5% to £73.5m (2013: £72.5m). Operating profit before exceptionals grew by 4.2% to £7.1m (2013: £6.8m) and statutory profit before tax is up 22.7% to £5.0m (2013: £4.1m). Basic earnings per ordinary share are up 15.6% to 26.7p (2013: 23.1p1) and before exceptionals are up 1.2% to 25.2p, with the prior year benefiting from a lower than normal tax charge (2013: 24.9p1).

 

During this period the economy has continued to recover and weather conditions have been favourable, both of which have helped sustain consumer expenditure. Trade benefited in particular from a warm September and strong Christmas trade. Those pubs which offer a great and memorable experience for the customer, with an interesting beer portfolio and a strong range of complementary products in food, wine and accommodation, have traded well in these circumstances.

 

Cash flow and investment

 

EBITDA2 was £10.6m, up 4.0% (2013: £10.2m). Total cash invested in capital expenditure was £5.2m (2013: £4.6m). This includes the acquisition of two pubs for £1.8m, which completed on 18 December 2014. The pubs are the Inn on the Pond, Nutfield, Surrey and The Ostrich, Colnbrook, near Heathrow. Both will be operated under management and will be further developed in due course. During the period we have realised proceeds of £0.7m (2013: £1.8m) from the disposal of two (2013: three) tenanted pubs and other assets. These have realised a property profit over net book value of £0.2m (2013: £0.2m). As a result of these cash movements, net debt stands at £72.2m (2013: £73.8m).

 

Dividend

 

The Board is proposing an interim dividend of 5.30p (2013: 5.15p), an increase of 2.9%. The dividend will be paid on 26 March 2015 to those shareholders on the register as at 13 March 2015.

 

Government and Regulation

 

During the period the Small Business, Enterprise and Employment Bill continued its passage through Parliament. The long running debate on the letting and operation of tied pubs by large pub companies, and the uncertainty arising from this, is now hopefully drawing to a close. Although some of the final terms of the Bill are not yet finalised, it now seems very likely that smaller companies, such as Shepherd Neame, with fewer than 500 tenanted or leased pubs will be exempt from the legislation, and so can feel sufficiently confident to continue to invest in this part of the business, as we have done in recent years. We will continue to support the existing Voluntary Code of Practice.

 

__________________________

1 Prior year comparatives have been restated for the share capital reorganisation
2 EBITDA: Earnings before exceptional items, interest, tax, depreciation, amortisation, profit or loss on sale of fixed assets (excluding property) and free trade loan discounts.

 

 

Operational Review

 

Tenanted and Retail Pub Operations

 

At the half year we operated 347 pubs (2013: 348) of which 297 (2013: 301) are tenanted or leased and 50 (2013: 47) managed. In the period we have acquired two managed houses, transferred one from tenancy to management, disposed of two tenanted pubs and transferred one pub from management to tenancy.

 

We aim to drive footfall to our pubs and attract the best licensees through improving the quality of our pub estate, growing the mix of our retail business, maintaining strong liquor businesses and increasing our investment in food and accommodation.

 

In the tenanted estate like-for-like EBITDAR3 grew by 3.4% (2013: +1.5%) as our investment programme has maintained momentum. Average EBITDAR per pub has grown by 4.0% (2013: +4.4%) as the quality and profile of our estate improves.

 

During the period we carried out a number of notable investments in the tenanted and leased estate, including the Railway Telegraph, Forest Hill, the New Inn, Murston and the Rose Inn at Kennington, as well as many smaller developments. We have continued to increase the rate of external and internal redecoration.

 

Managed houses like-for-like sales grew by 6.8% (2013: +7.5%) which is another excellent performance after a number of years of strong growth. This demonstrates the benefit of sustained investment in our outlets, in particular to exploit the opportunities in the eating out and accommodation markets. Our strongest growing revenue stream was accommodation at +14.5% (2013: +8.8%), with food +7.8% (2013: +8.4%) and liquor enjoying creditable growth of +4.9% (2013: +6.8%).

 

A key focus for investment in recent years has been to maximise the potential of our inns and hotels. The Botany Bay Hotel was a major development in 2014 and has performed well since reopening in April 2014. Our key focus this year is the major redevelopment of the Royal Wells Hotel in Tunbridge Wells which closed in January 2015 and is scheduled to re-open in May 2015 following a £2.4m investment, our largest ever investment in a single site. We have also added four bedrooms at the Sun Inn, Faversham by converting the adjoining cottage and continued our ongoing bedroom refurbishment programme within the estate.

 

Brewing and Brands

 

Over the last two years the Beer Business has faced the challenge of substantial increases in costs to treat our trade effluent whilst focussing our plant on the production of our own beers and managing the phased exit of the Kingfisher contract. As a response to this, the Board carried out a business reorganisation, introduced a number of brand initiatives and developed our portfolio, which are proving to be successful. As at December 2014 Kingfisher beer was brewed for the last time and this transition is now complete.

 

Total company beer volume for the period declined by -3.7% (2013: +4.1%). Excluding contract volumes, our core own and licensed beer portfolio grew by +1.0% against a strong comparative year (2013: +12.8%). We have continued to grow our national brand presence with a strong performance in on and off trade. Export sales however have not met our expectations in the US and Canada.

 

Our Whitstable Bay range has performed very strongly and we are very pleased with the response to the new addition to the range, Whitstable Bay Black Oyster Stout. Our Heritage range, including Bishops Finger, has also performed well in bottle. Asahi and Sam Adams Boston Lager have continued their strong growth trajectory.
As part of the continuing modernisation of our brand portfolio we have re-launched Master Brew with a new look, celebrating its heritage as 'The Original Kentish Ale'.

 

____________

3 EBITDAR - Pub earnings before interest, tax, depreciation, amortisation and rent payable.

 

Summary

 

We believe the business is in a strong position to benefit from further improvements in the economy. However we remain cautious about political and economic uncertainty that may arise from the General Election in May 2015. The strong trading performance and relatively favourable economic conditions in the last six months have enabled the company to drive our strategy of increasing investment in our pubs and improving services for our licensees so as to drive footfall to our pubs. At the same time we continue to improve the quality and distribution of our beer portfolio.

 

Taken together we are pursuing a consistent strategy to build the quality of our pub portfolio and brand assets. The evidence of the success of this long-term view is seen in the financial performance in this period.

 

 

M H Templeman 

Chairman

 

PROFIT AND LOSS ACCOUNT

26 weeks ended 27 December 2014

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

26 weeks

ended

26 weeks

ended

52 weeks ended

 

 

 

 

27 December

2014

28 December

2013

28 June 2014

 

 

 

 

£'000

£'000

£'000

Turnover

 

 

73,531

72,459

138,679

Operating charges before exceptional items

 

(66,430)

(65,647)

(125,278)

Operating profit before exceptional items

 

 

7,101

6,812

13,401

Operating exceptional items (note 3)

 

 

-

(526)

(1,279)

Operating profit

 

 

7,101

6,286

12,122

Profit on sale of property

 

 

215

183

224

Profit on ordinary activities before interest

 

 

7,316

6,469

12,346

Interest receivable and similar income

 

4

9

25

Interest payable and similar charges

 

 

(2,272)

(2,363)

(4,647)

Profit on ordinary activities before taxation

 

 

5,048

4,115

7,724

Taxation (note 4)

 

 

(1,121)

(705)

(1,546)

Profit after taxation

 

 

3,927

3,410

6,178

 

 

 

 

 

 

 

Earnings per 50p ordinary share* (note 5)

 

 

 

Basic

 

 

26.7p

 23.1p

 41.9p

 

Basic before exceptional items

 

 

 25.2p

 24.9p

 48.5p

 

Diluted

 

 

 26.4p

 22.9p

 41.6p

 

 

 

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

26 weeks ended 27 December 2014

 

There are no recognised gains or losses other than the profit attributable to the shareholders of the Company of £3,927,000 for the 26 weeks ended 27 December 2014 (26 weeks ended 28 December 2013: £3,410,000 and 52 weeks ended 28 June 2014: £6,178,000).

 

 

*Comparatives for the 26 weeks ended 28 December 2013 have been restated for the share capital reorganisation, which is set out in the statutory accounts for the 52 weeks ended 28 June 2014.

 

Balance Sheet 

As at 27 December 2014

 

 

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

27 December 2014

28 December 2013

28 June 2014

 

£'000

£'000

£'000

Fixed assets

 

 

 

Tangible fixed assets

202,503

201,400

201,591

Investments and loans

891

1,164

1,073

 

203,394

202,564

202,664

Current assets

 

 

 

Stock

6,234

5,796

6,417

Debtors

21,469

19,594

18,202

Cash

5,359

3,597

5,981

 

33,062

28,987

30,600

Creditors: amounts falling due within one year

 

 

 

Bank loans

(1,994)

-

(1,987)

Creditors

(25,782)

(23,564)

(23,477)

 

(27,776)

(23,564)

(25,464)

Net current assets

5,286

5,423

5,136

Total assets less current liabilities

208,680

207,987

207,800

Creditors: amounts falling due after more than one year

 

 

 

Bank loans

(75,532)

(77,383)

(75,463)

Provision for liabilities

(3,518)

(3,772)

(3,586)

Net assets

129,630

126,832

128,751

Capital and reserves

 

 

 

Called up share capital

7,429

12,818

7,429

Share premium account

1,099

1,439

1,099

Revaluation reserve

12,967

13,131

13,125

Reserve for own shares held

(606)

(548)

(908)

Profit and loss account

108,741

99,992

108,006

Equity shareholders' funds

129,630

126,832

128,751

 

These financial statements have not been audited (see note 1).

 

 

CASH FLOW STATEMENT

26 weeks ended 27 December 2014

 

 

Unaudited

 

Unaudited

 

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

27 December 2014

28 December 2013

28 June 2014

 

£'000

£'000

£'000

£'000

£'000

£'000

Net cash inflow from operating activities (note a)

 

10,358

 

11,891

 

22,437

Returns on investment and servicing of finance

 

 

 

 

 

 

Interest paid

(2,243)

 

(1,344)

 

(3,584)

 

Interest received

4

 

9

 

          25

 

 

 

(2,239)

 

(1,335)

 

(3,559)

Taxation paid

 

(1,135)

 

(411)

 

(1,458)

Capital expenditure and financial investment

 

 

 

 

 

 

Purchase of tangible fixed assets

(5,157)

 

(4,561)

 

(8,819)

 

Proceeds of sales of tangible fixed assets

735

 

1,751

 

2,217

 

Additional loans to customers

(16)

 

(70)

 

(210)

 

Customer loan redemptions

121

 

19

 

152

 

 

 

(4,317)

 

(2,861)

 

(6,660)

Equity dividends paid

 

(3,074)

 

(2,576)

 

(3,236)

Net cash (outflow)/inflow before financing

 

(407)

 

4,708

 

7,524

Financing

 

 

 

 

 

 

Purchase of own shares

 

(215)

 

-

 

(432)

Reclassification to reflect maturity

 

-

 

-

 

(1,987)

Movement in cash during the period

 

(622)

 

4,708

 

5,105

 

  

 

NOTES TO THE CASH FLOW STATEMENT

26 weeks ended 27 December 2014

 

a    Reconciliation of operating profit to net cash inflow from operating activities

 

 

 

Unaudited 26 Weeks ended 27 December 2014

 

 

 

Before exceptional items

Exceptional items

 

26 weeks ended

52 weeks ended

 

 

Total

28 December 2013

28 June 2014

 

 

£'000

£'000

£'000

£'000

£'000

Operating profit

 

7,101

-

7,101

6,286

12,122

 

 

 

 

 

 

 

Depreciation and amortisation

 

3,374

-

3,374

3,306

6,708

Impairment provision

 

-

-

-

-

45

Charge for share-based payments credited to reserves

 

241

-

241

196

439

Decrease/(increase) in stocks

 

183

-

183

(6)

(627)

(Increase)/decrease in debtors and prepayments

 

(3,242)

-

(3,242)

(821)

582

Increase/(decrease) in creditors and accruals

 

3,153

(597)

2,556

2,841

2,818

Free trade loan discounts

 

64

-

64

84

162

Loss on sale of assets (excluding property)

 

81

 -

81

5

188

 

 

3,854

(597)

3,257

5,605

10,315

Net cash inflow from operating activities

 

10,955

(597)

10,358

11,891

22,437

 

b    Reconciliation of cash flows to movement in net debt

 

 

 

Unaudited

26 weeks ended

Unaudited

26 weeks ended

Audited

52 weeks ended

 

 

 

27 December 2014

28 December 2013

28 June

2014

 

 

 

£'000

£'000

£'000

Opening cash and overdraft

 

 

3,994

(1,111)

(1,111)

Closing cash and overdraft

 

 

3,365

3,597

3,994

(Decrease)/increase in cash during the period

 

 

(629)

4,708

5,105

Reclassification to reflect maturity

 

 

-

-

1,987

Amortisation of loan issue costs

 

 

(69)

(81)

(148)

Movement in net debt during the period

 

 

(698)

4,627

6,944

Net debt at beginning of the period

 

 

(71,469)

(78,413)

(78,413)

Net debt at end of the period

 

 

(72,167)

(73,786)

(71,469)

 

c    Analysis of changes in net debt

 

 

 

 

Amortisation

 

 

 

June 2014

Cash flow

of issue costs

December 2014

 

 

£'000

£'000

£'000

£'000

Cash

 

5,981

(622)

-

5,359

Debt due within one year

 

(1,987)

-

(7)

(1,994)

 

 

3,994

(622)

(7)

3,365

Debt due after more than one year

 

(75,463)

-

(69)

(75,532)

Total

 

(71,469)

(622)

(76)

(72,167)

 

NOTES TO THE ACCOUNTS

26 weeks ended 27 December 2014

 

1.   Interim statement

The financial information contained in this interim statement, which is unaudited, does not constitute statutory accounts as defined in S435 of the Companies Act 2006. Statutory accounts for the 52 weeks ended 28 June 2014, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.

 

2.   Accounting policies

The interim accounts have been prepared on the basis of the accounting policies set out in the statutory accounts for the 52 weeks ended 28 June 2014.

 

3.   Operating exceptional items

There were no operating exceptional items in the current period. The £526,000 expense in the 26 weeks ended 28 December 2013 related to business reorganisation charges, principally in respect of redundancy and other staff costs. The £1,279,000 expense in the 52 weeks ended 28 June 2014 also included £708,000 of share capital restructure legal and professional fees, stationery and printing costs, of which £597,000 was paid in the current period, and a net £45,000 impairment provision in respect of tangible fixed assets.

 

4.   Taxation

 

27 December 2014

28 December 2013

28 June 2014

 

£'000

£'000

£'000

Corporation tax

1,189

1,076

2,146

Deferred tax

(68)

(371)

(600)

 

1,121

705

1,546

 

Taxation before exceptional items has been provided at 23% (2013: 26%) based on the estimated effective tax rate for the 52 weeks to 27 June 2015. The average statutory rate of corporation tax for the 52 weeks to 27 June 2015 is 20.75% (52 weeks to 28 June 2014: 22.50%).

 

5.   Earnings per share

The earnings per share are calculated on profit after taxation of £3,927,000 (2013: £3,410,000) and on 14,733,000 shares (2013: 14,762,000) being the weighted average number of ordinary shares in issue during the period, adjusted for shares held in respect of employee incentive plans and options.  The diluted earnings per share are calculated on the average number of shares in issue during the period adjusted by 127,000 shares (2013: 105,000).

 

The earnings per share before exceptional items are calculated on profit after tax and before exceptional items of £3,712,000 (2013: £3,673,000), being profit after tax of £3,927,000 (2013: £3,410,000) adjusted for operating exceptional charges after taxation of nil (2013: £408,000) and less profit on sale of property after tax of £215,000 (2013: £145,000).

 

6.   Dividends

 

27 December 2014

28 December 2013

28 June 2014

Declared and paid in the period

£'000

£'000

£'000

50p ordinary shares

 

 

 

Final dividend for 2014: 20.75p

3,074

-

-

 

3,074

-

-

£1 "A" shares

 

 

 

Final dividend for 2013: 20.15p

-

2,302

2,302

Interim dividend for 2014: 5.15p

-

-

590

 

-

2,302

2,892

2p "B" shares

 

 

 

Final dividend for 2013: 0.403p

-

274

274

Interim dividend for 2014: 0.103p

-

-

70

 

-

274

344

Dividends paid

3,074

2,576

3,236

 


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