Shepherd Neame Ltd - Interim Results London Stock Exchange
RNS Number : 5220B
Shepherd Neame Limited
05 March 2014
 



 

 

 

 

 

5 March 2014

SHEPHERD NEAME LIMITED

ANNOUNCEMENT OF INTERIM RESULTS

 

Shepherd Neame, the Kent-based brewer and pub operator, today announces results for the 26 weeks ended 28 December 2013.

 

Highlights include:

 

·     Turnover up 4.7% to £72.5m (2012: £69.2m)

·     Strong performance across pub and hotel estate

-  Managed house like-for-like sales up 7.5%, with liquor up 6.8%, food up 8.4% and accommodation up 8.8%

-  Tenanted like-for-like EBITDAR* up 1.5% and average EBITDAR per pub up 4.4%

·     Increased investment in marketing and pub decorations

·     Operating profit before exceptionals up 2.1% to £6.8m (2012: £6.7m)

·     Statutory profit before tax £4.1m (2012: £4.5m) following £0.5m business reorganisation exceptional item

·     Basic earnings per share before exceptionals are up 10.3% to 28.9p (2012: 26.2p)

·     Interim dividend increased to 5.15p per £1 Ordinary Share (2012: 5.00p)

 

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

 

Jonathan Neame, Chief Executive, commented:

 

"I am pleased to report a strong trading performance in all areas of the business, which shows the benefit of investing consistently in our pubs and brands over many years. Our tenanted, managed pubs and hotels and core brands have all accelerated their rate of growth during this period. We believe our business is in a strong position to continue to benefit from any further improvement in the economy."

 

 FOR FURTHER INFORMATION PLEASE CONTACT:

 

Shepherd Neame Limited

Kreab Gavin Anderson

 

REGIONAL & TRADE MEDIA CONTACT:

 

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 over 1,000 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 fastest growing 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 bottled 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 cask, keg (3.9% abv) and 500ml bottled (4% abv) Pale Ale, a keg and 330ml bottled (4.5% abv) Blonde Lager and bottled (4.5% abv) Organic Ale.

 

§ Master Brew: Widely distributed draught ale (3.7% abv) - a 'local hero' brand mainly sold in Kent.  

 

The Company also brews lagers under licence or contract:

 

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

 

§ Samuel Adams Boston Lager: A full-flavoured and balanced US craft lager (4.8% abv) brewed under licence from the Boston Beer Company since April 2012.

 

§ Oranjeboom Pilsener: Lager brewed under licence from United Dutch Breweries (3.9% abv), with wide distribution in the South East.

 

In the 26 weeks ended 28 December 2013 Shepherd Neame sold 151,000 brewers' barrels of beer (43.5 million pints) including 132,000 brewers' barrels of own brewed and packaged beer (38.0 million pints). The majority of these sales were made in the UK although the Company also exports to more than 20 countries including Sweden, Italy and Ireland.

 

At the half year end, the Company operated 348 pubs in the South East, of which 301 were tenanted or leased and 47 managed. The pub estate ranges from food-focused destination houses and 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 a strong trading performance in all areas of the business for the 26 weeks to 28 December 2013.

 

Turnover during the period increased by 4.7% to £72.5m (2012: £69.2m).  Operating profit before exceptionals grew by 2.1% to £6.8m (2012: £6.7m) and statutory profit before tax is £4.1m (2012: £4.5m). Basic earnings per £1 share are down 2.9% to 26.8p (2012: 27.6p) and before exceptionals are up 10.3% to 28.9p (2012: 26.2p).

 

On the back of our strong trading we have re-invested in marketing to further strengthen our brands and additional estates expenditure to both improve the look and feel of our pubs to drive a better experience for our customers and to repair recent storm damage. In addition we have made a provision for VAT due on machine games income.  

 

I am pleased to report that we are on track with our strategic plans.  The key focus of the Board this year is to implement the new logistics agreement, seek new sales opportunities arising from that, consolidate the business and Board around two trading divisions as announced in July 2013, and drive higher performance out of existing assets. 

 

The company incurred a final exceptional charge of £526k following the transfer of warehousing and distribution activities to Kuehne and Nagel Drinkflow Logistics Ltd ('KNDL') in October, resulting in a total exceptional charge arising from the Business and Board reorganisation of £1.8m.

 

EBITDA1 was £10.2m, up 1.6% (2012: £10.1m). There was a net cash inflow from working capital movements of £2.1m, a portion of which is linked to the transition to the new logistics agreement and will reverse. Total cash invested in capital expenditure during the period was lower at £4.6m (2012: £8.3m).  We have taken the lease of The George, Wardour Street, London, investing £0.2m in the property to date, and have raised proceeds of £1.8m (2012: £1.9m) from the disposal of 3 pubs and other assets. This realised a profit of £0.2m (2012: £0.2m).

 

As a result of the favourable working capital movements and reduced capital expenditure in the period, net debt has reduced by £4.6m to £73.8m.

 

Dividend

 

The Directors have declared an interim dividend for the year ending 28 June 2014 of 5.15p (2012: 5.00p) on the £1 'A' Ordinary Shares and 0.103p (2012: 0.100p) on the 2p 'B' Ordinary Shares.  The dividend will be paid on 27 March 2014 to shareholders on the register as at 14 March 2014.

 

Board of Directors

 

As previously announced Graeme Craig was appointed Director of Brewing and Brands from 1 January 2014 following the resignation of Tom Falcon as Production and Distribution Director.  Nigel Bunting, currently Retail Director, will become Director of Retail and Tenanted Operations with effect from 1 July 2014.  George Barnes will become Property and Services Director from the same date. 

 

Share liquidity

 

In October 2013, the Board announced that it was undertaking a review to address the impact of the Company's share capital structure on share liquidity. This review is ongoing and the Board will update shareholders further in due course.

 


 

[1] 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

 

At the half year we operated 348 (2012: 353) pubs of which 301 (2012: 307) are tenanted or leased and 47 (2012: 46) managed.  We acquired one managed house and disposed of three tenanted and three unlicensed properties during the period.

 

Our strategy is to grow our mix of retail business, improve the quality of our pub estate, own and operate the best outlets within our heartland, increase our exposure to food and accommodation and reduce our exposure to small wet-led outlets.  This strategy combined with our continued investment has produced excellent trading results.

 

In our tenanted estate like-for-like EBITDAR  grew by 1.5% (2012: +0.4%).  Average EBITDAR per pub has grown year on year for several years as we improve the profile of our estate and this year has again increased  by +4.4% (2012: +3.9%).

 

During the period we have invested £1.4m (2012: £1.2m) in the tenanted estate.   Notable investments during the period include the final stage of the redevelopment of The Shakespeare in Canterbury with the opening of the Wine and Coffee House on the Buttermarket, The Prince of Wales, Reigate, Prince Albert, Bexleyheath, Kings Head, Shadoxhurst and Hop Pole, Wandsworth. In addition we have matched several investments with entrepreneurial new licensees, such as at The Prince Arthur, Shoreditch and Castle, Eynsford.

 

Managed House like-for-like (lfl) sales grew by 7.5% (2012: +2.9%).  This is an excellent performance and demonstrates the quality of our offer and the loyalty of our customers.  Food and accommodation have continued to be our fastest growing revenue streams as we invest in this part of our operation.  Food lfl sales grew by +8.4% (2012: +3.5%), accommodation lfl sales by +8.8% (2012: +5.8%) and liquor lfl sales by 6.8% (2012: +2.4%).

 

The Marine Hotel has performed above expectations since the major redevelopment in 2013.  Refurbishment of the restaurant and bar at The Bell Hotel, Sandwich completed in December and the redevelopment of The Fayreness Hotel, Kingsgate is nearing completion and will re-open before Easter under its new name, The Botany Bay Hotel.

 

Given the level of investment we have made in developing our accommodation offer in recent years, it is particularly pleasing that we have been nominated a finalist in the Best Accommodation Operator in the Publican Awards to be held in March 2014.

 

Within the Beer Business our key focus during this period has been the consolidation of Sales and Marketing and Production and Distribution into one trading division, the implementation of the logistics agreement with KNDL and the commissioning of the new water treatment plant.

 

Total company beer volume grew by 4.1% for the period (2012: -4.0%).  The original contract to brew Kingfisher beer terminated in October 2013 at which point we ceased production of the bottled beer.  We will continue to produce the keg beer until December 2014. Excluding Kingfisher, our core own and licensed beer portfolio grew by 11.1%.

 

Marketing spend has been increased to support core and licensed brand growth.  In July 2013, we launched a multimedia advertising campaign with comedy duo, Armstrong and Miller to support Spitfire Ale.  Both Spitfire and Bishops Finger have enjoyed good periods and the launch of the Whitstable Bay range has been very well received with new stockists above expectations to date.

 

The new water treatment plant will become operational in March 2014.  This plant will minimise the consumption of extract well water by enabling us to recycle 40% of our water for re-use in boilers and cleaning. This investment is necessary as we near the end of a long term agreement with our local water company.  The transition from the old arrangement to the new plant is a major project for the business with costly environmental compliance.  We now anticipate that ongoing annual charges will be £1.0m higher than the previous arrangement, but this investment will help us to offset the materially higher costs that would have been incurred if we did not pre-treat our water prior to discharge.

 

 

 

 

Summary

 

The strong trade we have experienced during this period shows the benefit of investing consistently in our pubs and brands over many years, including during the economic downturn.  Our tenanted and managed pubs and core brands have all accelerated their rate of growth during this period as consumer confidence has improved on the prior year.

 

Our key focus this year is to effect the smooth reorganisation of our Brewing and Brands business and Board and so far we are on track with our plans.

 

We believe our business is in a strong position to continue to benefit from further anticipated improvement in the economy and consumer confidence.  However, we remain cautious about ongoing utility and regulatory driven cost inflation which continues to impact our business.

 

M H Templeman

Chairman



PROFIT AND LOSS ACCOUNT

26 weeks ended 28 December 2013

 












Unaudited

Unaudited

Audited





26 weeks

ended

26 weeks

ended

52 weeks ended





28 December

2013

29 December

2012

29 June 2013





£'000

£'000

£'000

Turnover



72,459

69,199

134,906

Operating charges before exceptional items


(65,647)

(62,525)

(122,198)

Operating profit before exceptional items



6,812

6,674

12,708

Operating exceptional items (note 3)



(526)

-

(1,243)

Operating profit



6,286

6,674

11,465

Profit on sale of property



183

185

317

Profit on ordinary activities before interest



6,469

6,859

11,782

Interest receivable and similar income


9

5

10

Interest payable and similar charges



(2,363)

(2,332)

(4,685)

Profit on ordinary activities before taxation



4,115

4,532

7,107

Taxation (note 4)

 

 

(705)

(1,026)

(1,637)

Profit after taxation and retained



3,410

3,506

5,470

 

 

 

 

 

 

 

Earnings per £1 nominal share value (note 5)




Basic

 

 

26.8p

 27.6p

 43.0p

 

Basic before exceptional items

 

 

 28.9p

 26.2p

 48.1p

 

Diluted



 26.6p

 27.4p

 42.8p

 

 

 

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

26 weeks ended 28 December 2013

 

There are no recognised gains or losses other than the profit attributable to the shareholders of the Company of £3,410,000 for the 26 weeks ended 28 December 2013 (26 weeks ended 29 December 2012: £3,506,000 and 52 weeks ended 29 June 2013: £5,470,000).



Balance Sheet 

As at 28 December 2013





 

 




 

Unaudited

Unaudited

Audited

 

28 December 2013

29 December 2012

29 June 2013


£'000

£'000

£'000

Fixed assets




Tangible fixed assets

201,400

200,448

201,312

Investments and loans

1,164

2,815

1,193


202,564

203,263

202,505

Current assets




Stock

5,796

5,983

5,790

Debtors

19,594

19,141

18,768

Cash

3,597

82

85


28,987

25,206

24,643

Creditors: amounts falling due within one year




Bank overdrafts

-

(337)

(1,196)

Creditors

(23,564)

(21,891)

(18,704)


(23,564)

(22,228)

(19,900)

Net current assets

5,423

2,978

4,743

Total assets less current liabilities

207,987

206,241

207,248

Creditors: amounts falling due after more than one year




Bank loans

(77,383)

(78,230)

(77,302)

Provision for liabilities - deferred tax

(3,772)

(3,720)

(4,144)

Net assets

126,832

124,291

125,802

Capital and reserves




Called up share capital

12,818

12,818

12,818

Share premium account

1,439

1,439

1,439

Revaluation reserve

13,131

13,402

13,228

Reserve for own shares held

(548)

(862)

(798)

Profit and loss account

99,992

97,494

99,115

Equity shareholders' funds

126,832

124,291

125,802

 

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

 

 



CASH FLOW STATEMENT

26 weeks ended 28 December 2013

 

 

Unaudited

 

Unaudited

 

Audited

 

26 weeks ended

26 weeks ended

52 weeks ended

 

28 December 2013

29 December 2012

29 June 2013


£'000

£'000

£'000

£'000

£'000

£'000

Net cash inflow from operating activities (note a)

 

11,891

 

9,212

 

19,023

Returns on investment and servicing of finance

 

 

 

 

 

 

Interest paid

(1,344)

 

(1,287)

 

(4,538)

 

Interest received

9

 

5

 

          10

 

 

 

(1,335)

 

(1,282)

 

(4,528)

Taxation paid

 

(411)

 

(1,317)

 

(2,333)

Capital expenditure and financial investment

 

 

 

 

 

 

Purchase of tangible fixed assets

(4,561)

 

(8,278)

 

(13,771)

 

Proceeds of sales of tangible fixed assets

1,751

 

1,916

 

2,742

 

Additional loans to customers

(70)

 

(100)

 

(275)

 

Customer loan redemptions

19

 

194

 

270

 

 

 

(2,861)

 

(6,268)

 

(11,034)

Equity dividends paid


(2,576)


(2,501)


(3,140)

Net cash inflow/(outflow) before financing

 

4,708

 

(2,156)

 

(2,012)

Financing

 

 

 

 

 

 

New long-term loans

 

-

 

2,000

 

6,000

Issue costs of long-term loans

 

-

 

(475)

 

(475)

Repayment of long-term loans

 

-

 

-

 

(5,000)

Movement in cash during the period


4,708


(631)


(1,487)

 

 



NOTES TO THE CASH FLOW STATEMENT

26 weeks ended 28 December 2013

 

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

 



Unaudited

Unaudited

Audited



26 weeks ended 28 December 2013

26 weeks ended

52 weeks ended



Before Exceptional items

Exceptional items


29 December 2013

29 June 2013



Total

Total

Total



£'000

£'000

£'000

£'000

£'000

Operating profit


6,812

(526)

6,286

6,674

11,465



 

 

 

 

 

Depreciation and amortisation


3,306

-

3,306

3,239

7,098

Charge for share-based payments credited to reserves


196

-

196

115

302

Increase in stocks


(6)

-

(6)

(312)

(119)

Increase in debtors and prepayments


(821)

-

(821)

(1,157)

(807)

Increase in creditors and accruals


2,763

78

2,841

516

739

Free trade loan discounts


84

-

84

113

210

Loss on sale of assets (excluding property)


5

 -

5

24

135



5,527

78

5,605

2,538

7,558

Net cash inflow from operating activities


12,339

(448)

11,891

9,212

19,023

 

b    Reconciliation of cash flows to movement in net debt

 

 

 

Unaudited

26 weeks ended

Unaudited

26 weeks ended

Audited

52 weeks ended

 



28 December 2013

29 December 2012

29 June

2013




£'000

£'000

£'000

Opening cash and overdraft

 

 

(1,111)

376

376

Closing cash and overdraft



3,597

(255)

(1,111)

Increase/(decrease) in cash during the period

 

 

4,708

(631)

(1,487)

New long-term loans

 

 

-

(2,000)

(6,000)

Repayment of long-term loans

 

 

-

-

5000

Amortisation of loan issue costs



(81)

(72)

(144)

Movement in net debt during the period

 

 

4,627

(2,703)

(2,631)

Net debt at beginning of the period



(78,413)

(75,782)

(75,782)

Net debt at end of the period



(73,786)

(78,485)

(78,413)

 

c    Analysis of changes in net debt

 

 

 

 

Amortisation

 

 


June 2013

Cash flow

of issue costs

December 2013



£'000

£'000

£'000

£'000

Cash

 

85

3,512

-

3,597

Bank overdrafts


(1,196)

1,196

-

-

 

 

(1,111)

4,708

-

3,597

Debt due after more than one year


(77,302)

-

(81)

(77,383)

Total


(78,413)

4,708

(81)

(73,786)



NOTES TO THE ACCOUNTS

26 weeks ended 28 December 2013

 

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 29 June 2013, 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 29 June 2013.

 

3.   Operating exceptional items

 

There was an operating exceptional item in the current period of £526,000 (26 weeks ended 29 December 2012: nil and 52 weeks ended 29 June 2013: £1,243,000) relating to business reorganisation charges, principally in respect of redundancy and other staff costs.

 

4.   Taxation

 

 

28 December 2013

29 December 2012

29 June 2013

 

£'000

£'000

£'000

Corporation tax

1,076

1,245

1,432

Deferred tax

(371)

(219)

205

 

705

1,026

1,637

 

Taxation before exceptional items has been provided at 26% (2012: 27%) based on the estimated effective tax rate for the 52 weeks to 28 June 2014.

 

5.   Earnings per share

 

The earnings per share are calculated on profit after taxation of £3,410,000 (2012: £3,506,000) and on 12,722,000 shares (2012: 12,709,000) 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 105,000 shares (2012: 75,000).

 

The earnings per share before exceptional items are calculated on profit after tax and before exceptional items of £3,673,000 (2012: £3,333,000), being profit after tax of £3,410,000 (2012: £3,506,000) before operating exceptional charges after taxation of £408,000 (2012: nil) and less profit on sale of property after tax of £145,000 (2012: £173,000).



 

6.   Dividends

 

 

28 December 2013

29 December 2012

29 June 2013

Declared and paid in the period

£'000

£'000

£'000

£1 "A" ordinary shares

 

 

 

Final dividend for 2013: 20.15p (2012: 19.60p)

2,302

2,234

2,234

Interim dividend for 2013: 5.00p

-

-

571

 

2,302

2,234

2,805

2p "B" ordinary shares

 

 

 

Final dividend for 2013: 0.403p (2012: 0.392p)

274

267

267

Interim dividend for 2013: 0.100p

-

-

68

 

274

267

335

Dividends paid

2,576

2,501

3,140

 

 

7.   Provisions

 

On 30 October 2013 the Court of Appeal issued its judgement in The Rank Group plc case, in relation to the VAT treatment of the income from certain amusement with prizes machines, in favour of HMRC. The company made a claim which stands in law behind the Rank case and as a result of the Court of Appeal decision HMRC have indicated that they would seek repayment of this claim. As such a provision for £0.2m of charges and interest was accrued in the period.

 


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