The Company has benefited in this past year from the major investment programme that we embarked upon in 2016 and which has continued throughout the course of this last year. This has allowed us to continue to grow whilst dealing with some significant challenges to our cost base.
Turnover for the year was
During the year we have continued our strategy of investing in our core pub estate, inns and hotels, whilst continuing to sell poorer quality properties, repositioning our estate into assets that are fit for the future. Last year we reported that we were embarking on a major investment programme, and this has been a key focus of the year, with many of those projects now nearing completion. In addition we have acquired a new hotel in the
The strategy of the Company is to own and operate freehold properties and offer superb hospitality in outstanding properties in great locations. Our business is diverse and operates in several different markets and we believe that this diversity provides some resilience over the course of the business cycle.
Pubs & Inns
Pubs – We own and support an estate of high quality tenanted pubs, run by dedicated and talented individuals, who are attracted by the support package and investment that we offer to help them to realise their pub’s potential. Investment into our pubs is focused on creating sustainable, long term businesses with multiple income streams and strong food offerings. Where there is the potential and the demand we invest in letting bedrooms for our pubs to create an additional income stream to their restaurant and drinks businesses.
Brewery – Great beer is an important part of our heritage and customer offer. We are committed to continuing to brew fabulous beers and distribute them exclusively in our own properties. Our new brewery in
Inns – We have a small but growing number of high quality inns that each have their own identity and support local suppliers. Our inns showcase our own beers, offer fantastic local food and comfortable rooms. We will acquire and develop these larger managed properties which ideally will have bedrooms as well as an excellent and exciting food and drink offering.
Hotels & Spas – Our collection of provincial hotels are individual in nature, but united in their conviviality, which allows our customers to feel comfortable and at home. We maintain our hotels in good order, provide high levels of service to our guests and a warm welcome. We are looking to add to the number of hotels that we own through acquisition and new build.
In the past few years we have placed much emphasis on the recruitment and retention of great team members who can help our customers to feel welcome and at home. As a result we have been working on developing and enhancing our employee proposition. One element of this has been our move away, last year, from being a national minimum wage employer. However developing new training and development programmes, together with increased focus on employee engagement, has also been important.
I am delighted that our People and Development Team was rewarded by being named as HR Team of the Year in the HR Distinction Awards. This was followed up by us being named in the
New Offices and Brewery
We have been on site for much of the year building our new offices, brewery and stables in
Once we move to
Acquisitions, developments and disposals
Last year’s developments at The Crown at
The major redevelopment of the Beverley Arms in the
During the year we have sold 17 pubs from the bottom end of our estate.
An interim dividend of 1.10p (2017: 1.10p) was paid in
There have been no changes to the Board during the course of the year.
I have often said in my report that we are lucky to have within the Company fantastic teams of people without whom we could not be the successful business that we are. Our strong family values and progressive attitude, demonstrated this year by some of the awards that we have won, continue to attract wonderful people and exciting new talent to the company.
In the second half of the year we initiated a project to look at how we run our hotels, questioning from the bottom up our team and management structures. These have not changed for many years, and whilst the structure has served us well in the past, the nature and mix of our hotel business has changed.
I would like to thank all our staff, customers, suppliers and shareholders for their support over the past year and wish everyone well for the year ahead.
The weather throughout the Spring and into April has been some of the worst that I can remember, and this has had an inevitable impact across all areas of the business, meaning that we have got off to a slightly slower start than we would have liked.
The coming year presents some uncertainties, particularly in our negotiations with the
The significant investments that we have completed this year, together with the full year effect of those completed last year give us cause for confidence, and I am hopeful that we will once more make progress in the year to come.
Ann YerburghChairman 12 June 2018
The beginning of the year started with considerable concerns about food and wage inflation, which threatened many areas of the cost base. At the same time consumer spending has been fickle, with a number of the major industry participants choosing to discount, particularly in the casual dining market and at the value end of the pub market. As a result the ability to pass cost increases on in full has been a challenge and in some areas of the business operating margins have been under pressure.
Sales have increased by 9%, and on a like for like basis, excluding acquisitions, they increased by 2.5%. Continued refurbishments, particularly in the hotels have been an important factor in supporting this growth. Despite pressure on food and labour margins EBITDA has increased to
We have continued to place a significant emphasis on how we attract, recruit, train, develop and retain the best teams possible to run and support our various operations. We have put in place a new training and development at local level across all of our properties and have continued to undertake annual engagement surveys across the business. The shortage of available employees in the hospitality industry is becoming more acute, as has been predicted over the past few years, and it is our aim to be the employer of choice in all our local markets. It was very pleasing therefore to be named in the Sunday Times Regional Best Companies to Work For in
We took the decision at the half year to refresh our websites once more, an operation that seems to be becoming an ongoing event every two to three years. This project is currently underway and will be completed at the start of the summer, with a relaunch in July. In part this has allowed us to consider how we market our bedroom stock, with the objective of slowing the seemingly inexorable rise in commissions payable to online booking agents. This cost which has been rising at an alarming rate in recent years as the market moves towards single platform providers at the expense of the owners and operators of the underlying hotels.
Our strategy remains focused on our pubs, inns and hotels and we have plans to continue to invest in them to secure our future growth.
We own a freehold estate of approximately 240 tenanted pubs, having sold 17 pubs in the year. Our pub estate encompasses community locals to destination food led pubs in both rural and town centre locations, ranging geographically from
Our strategy has been consistent in recent years, focusing on the quality pubs within the estate, investing in them alongside proven operators to expand and improve the premises. We have focused on establishing good quality food offerings and where possible the development and refurbishment of bedrooms. Our strategy has been wholly focused on creating an estate of high quality, sustainable, growth businesses with several income streams. Tenanted pub businesses are by nature diversified, with resilient earnings and when well invested, with dedicated operators operating profitable businesses, they should suffer from low levels of disruption from tenant churn and profits achieved should convert to high levels of cash generation.
Our trading started the first half of the year steadily, and by the half year we were broadly level year on year. Despite disposing of 17 more poorly performing pubs during the year this trend held up and has resulted in full year operating profits being almost exactly the same as last year. The mix of sales in our pubs continues to change with beer volumes declining in line with the market at about 4-5%, in favour of wines, spirits and soft drinks. Average EBITDA per pub increased during the year by 5%.
For the past ten years we have participated in the annual
During the year we completed 25 development projects at a cost of
Last year we decided to trial some new managed pub concepts in pubs where the level of investment required meant that it was difficult to attract a third party operator. The first of these, the Grill and Grain at Hoghton, suffered a total loss from fire in
We did not find any suitable pubs to acquire in the year, however we continue to look to add into our business good quality tenanted pubs with balanced income streams that we can either absorb into our existing tenanted estate or make significant investment to reposition as a managed operation.
We continue to operate our small craft brewery in
We own and manage a small portfolio of ‘Inns of Character’ and continue to seek high quality properties in outstanding locations to develop this collection. Our Inns have a busy bar at the hub, a home cooked food offering and high quality, comfortable accommodation – they focus on providing outstanding hospitality and offer an attractive and more personal alternative to the mid-market branded chains.
Our Inns have continued to grow, with sales in the current year increasing to
In the current year the Inns have benefited from a full year contribution from
We continue to look for new opportunities to grow our Inns portfolio and will make further acquisitions where we believe we can add value.
Hotels & Spas
We own and operate ten hotels which are geographically spread across the north and south of
The provincial hotel market continued to grow over the year and saw further increases in bedroom stock being added to the market. During the year our hotels grew their sales by 13%. Much of this increase reflects the acquisitions of Middleton’s in
Trading at our other hotels has been the subject of some disruption as a result of the accelerated refurbishment programme that we disclosed in last year’s report. During the year we have refurbished 67 bedrooms as well as the restaurant areas at Aztec,
Last year, in response to the costly impact of the National Living Wage, we undertook a review of the whole of our hotel operations, seeking to redesign our operational structure to become more efficient. This project was completed at the year end and we hope that it will bring benefits in the current year.
Summary and outlook
Once again the last year has been an extremely busy one, with continuing investment in a good number of large and high quality investment schemes. We are working hard to settle in our new investments and are pleased with the early results from them. The successful launch of the Beverley Arms will be a significant part of our growth this coming year and the recruitment and training of the new team there has our full attention.
Our priority this year will be to cement the performance of the investment projects delivered last year, of which there are a good number, and to make a success of the new operational and management structure in our hotels. The delivery of our new website will give us a better opportunity to market our hotels directly to our guests, rather than through third parties. We also look forward to finalising our plans for the development of
We will be highly selective in making any further acquisitions, but should the opportunities present themselves we will seek to acquire additional outstanding properties in great locations to grow the business for the future.
Turnover for the year ended
The measurement of the interest rate swaps at fair value resulted in a profit of
Profit before taxation for the year increased by 72% to
The key issues facing the Group are covered in the Chairman’s Statement and Strategic Report. The KPI’s used by the Group to monitor its overall financial position can be summarised as follows:
2018 2017 Group GBP’m GBP’m Turnover 92.2 84.4 EBITDA 20.2 18.9 Depreciation 7.3 6.8 Operating profit 12.9 12.1 Profit before tax 9.8 5.7 Net debt 63.7 47.6 Earnings per share (pence) 13.8 7.7 Pubs and Inns GBP’m GBP’m Turnover 48.6 45.7 EBITDA 16.5 15.9 Depreciation 3.8 3.6 Operating profit (before Group central charges) 12.7 12.3 Average number Tenanted 255 265 Managed 11 10 Hotels & Spas GBP’m GBP’m Turnover 43.6 38.7 EBITDA 11.1 10.0 Depreciation 3.2 2.8 Operating profit (before Group central charges) 7.9 7.2 Average number Hotels 8 6 Lodges 2 1
The principal non-financial indicators monitored by management are:
Pubs and Inns
Utility indices, beer quality, room occupancy rates, customer complaints, health and safety incidents, beer volumes and tenant recruitment.
Room occupancy rates, customer complaints, health and safety incidents, spa memberships and wedding and event numbers.
Interest rate swaps measured at fair value
The Group has interest rate swaps for
Net interest payable was
The tax charge on profit for the year was
Earnings per share
The earnings per share was 13.8p (2017: 7.7p).
An interim dividend of 1.10p has been paid and the Board recommends a final dividend of 3.36p, which will make a total of 4.46p for 2018 (2017: 4.46p).
Cash flow and financing
The Group’s net borrowing increased by
The Group made deficit contributions to the defined benefit pension schemes of
The Group has
During the year we sold 17 pubs and four ancillary properties for a total of
In line with our accounting policy, 20% of our properties were subject to a formal revaluation, and additionally an impairment review was carried out on the rest of our property estate. This resulted in no overall change to the total value of our property portfolio.
EXTRACT FROM AUDITED FULL FINANCIAL STATEMENTS FOR THE YEAR ENDED
GROUP PROFIT AND LOSS ACCOUNT
2018 2017 GBP’m GBP’m Total Total Turnover 92.2 84.4 Cost of sales (68.1) (62.1) Gross profit 24.1 22.3 Distribution costs (3.7) (3.2) Administrative expenses (7.5) (7.0) Operating profit 12.9 12.1 Property disposals 0.1 0.3 Profit before interest 13.0 12.4 Net interest payable (3.5) (3.0) Profit (loss) on interest rate swaps measured at fair value 1.3 (2.6) Finance charge on pension liability (1.0) (1.1) Profit on ordinary activities before taxation 9.8 5.7 Taxation on profit for the year (1.7) (1.2) Profit on ordinary activities after taxation 8.1 4.5
Dividends : 2018 2017 Ordinary paid per share 1.10p (2017 – 1.10p) 0.6 0.6 Ordinary recommended per 25p share 3.36p (2017 – 3.36p) 2.0 2.0 Earnings per ordinary share 13.8p 7.7p
The final dividend of 3.36p per ordinary share in respect of the year ended
GROUP BALANCE SHEET At 31 March 2018 2018 2017 GBP’m GBP’m ___________________________________________ ________ ________ Fixed Assets Tangible assets 289.5 270.9 Investments 3.1 3.2 __________________________________________ ________ ________ 292.6 274.1 Current assets Stocks 0.6 0.6 Trade and other debtors 12.6 12.1 Cash at bank and in hand 2.8 2.4 __________________________________________ ________ ________ 16.0 15.1 Creditors due within one year Trade and other creditors (14.7) (12.1) Net current assets 1.3 3.0 _______________________________________ ________ ________ Total assets less current liabilities 293.9 277.1 Creditors due after one year (84.8) (71.8) _______________________________________ ________ ________ Net assets excluding pension liability 209.1 205.3 ________________________________________ ________ ________ Pension liability (34.9) (39.1) _____________________________________________ ________ ________ Net assets 174.2 166.2 _______________________________________ ________ ________ Capital and reserves Called up share capital 14.7 14.7 Capital redemption reserve 1.1 1.1 Revaluation reserve 77.5 78.5 Profit and loss account 80.9 71.9 _______________________________________________ ________ ________ Equity shareholders’ funds 174.2 166.2 _________________________________________ ________ ________
GROUP CASH FLOW STATEMENT
For the year ended
2018 2017 GBP’m GBP’m ______________________________________________ ________ _________ Cash flow from operating activities 19.5 15.0 Tax paid / refunded (0.1) 0.1 Cash flow from financing activities 10.9 - Cash flow from investing activities (27.3) (21.0) Equity dividends paid (2.6) (2.6) ___________________________________________ ________ ________ Increase (decrease) in cash and cash equivalents 0.4 (8.5) Cash and cash equivalents at beginning of year 2.4 10.9 ________________________________________________ ________ _________ Cash and cash equivalents at end of year 2.8 2.4 Loan capital (66.5) (50.0) __________________________________________________ ________ _________ Net debt (63.7) (47.6) Reconciliation of net cash flow to movement in net debt Increase (decrease) in cash 0.4 (8.5) Cash flow from increase in debt (16.5) (5.0) __________________________________________________ ________ ________ (16.1) (13.5) Net debt at beginning of year (47.6) (34.1) _____________________________________________ ________ ________ Net debt at end of year (63.7) (47.6) __________________________________________ ________ ________
Notice of Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held at
To consider, and if thought fit, pass the following resolutions which will be proposed as ordinary resolutions.
1. To receive and adopt the accounts for the year ended
2. To re-elect Mr
3. To re-elect Mrs
4. To approve and confirm the remuneration of the directors for the year ended
5. To reappoint
To consider, and if thought fit, pass the following resolutions of which resolutions 6 and 8 will be proposed as ordinary resolutions and resolution 7 as a special resolution.
6. THAT, for the purposes of section 551 of the Companies Act 2006 (the Act) the directors of the Company be and are hereby generally and unconditionally authorised to exercise all powers of the Company to allot equity securities (within the meaning of section 560 of the Act) up to an amount equal to the aggregate nominal amount of the authorised but unissued share capital of the Company provided that this authority shall expire (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the next annual general meeting of the Company, save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors of the Company may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
This authority is in substitution for any and all authorities previously conferred upon the directors for the purposes of section 551 of the Act, without prejudice to any allotments made pursuant to the terms of such authorities.
7. THAT, subject to the passing of resolution 6 above, the directors of the Company be and are hereby empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) pursuant to the authority conferred by resolution 6 above as if section 561 of the Act did not apply to any such allotment provided that the power conferred by this resolution shall be limited to:
i. the allotment of equity securities for cash in connection with an issue or offer of equity securities (including, without limitation, under a rights issue, open offer or similar arrangement) to holders of equity securities in proportion (as nearly as may be practicable) to their respective holdings of equity securities subject only to such exclusions or other arrangements as the directors of the Company may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange in any territory; and
ii. the allotment (otherwise than pursuant to resolution 7.1) of equity securities for cash up to an aggregate nominal amount of
The power conferred by this resolution 7 shall expire (unless previously renewed, revoked or varied by the Company in general meeting), at such time as the general authority conferred on the directors of the Company by resolution 6 above expires, except that the Company may at any time before such expiry make any offer or agreement which would or might require equity securities to be allotted after such expiry and the directors of the Company may allot equity securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
8. To authorise the Company generally and unconditionally to make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of ordinary shares of
i. the maximum aggregate number of ordinary shares that may be purchased is 5,882,750. Representing 10% of the issued share capital of the Company;
ii. the minimum price (excluding expenses) which may be paid for each ordinary share is
iii. the maximum price (excluding expenses) which may be paid for each ordinary share is an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share of the Company (as derived from the
iv. unless previously renewed, varied or revoked, the authority conferred by this resolution shall expire at the earlier of the conclusion of the Company’s next Annual General Meeting and the date which is six months from the end of the Company’s next financial year save that the Company may, before the expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or may be executed wholly or partly after the expiry of such authority.
Resolution 6 – Authority to allot relevant securities
The Company requires the flexibility to allot shares from time to time. The directors are limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Companies Act 2006 (the Act).
Accordingly, resolution 6 would grant this authority (until the next Annual General Meeting or unless such authority is revoked or renewed prior to such time) by authorising the directors (pursuant to section 551 of the Act) to allot relevant securities up to an amount equal to the aggregate nominal amount of the authorised but unissued share capital of the Company as at
Resolution 7 – Disapplication of statutory pre-emption rights
This resolution seeks to disapply the pre-emption rights provisions of section 561 of the Act in respect of the allotment of equity securities for cash pursuant to rights issues and other pre-emptive issues, and in respect of other issues of equity securities for cash up to an aggregate nominal value of
Resolution 8 - Authority to make market purchases of shares
Resolution 8 seeks authority for the Company to make market purchases of its own ordinary shares. If passed, the resolution gives authority for the Company to purchase up to 5,882,750 of its ordinary shares, representing 10 per cent of the Company’s issued ordinary share capital.
Resolution 8 specifies the minimum and maximum prices which may be paid for any ordinary shares purchased under this authority. The authority will expire at the conclusion of the Company’s next Annual General Meeting in 2019 or, if earlier, the date which is six months from the end of the Company’s financial year which commenced on
Any shares purchased under this authority will be cancelled. As a member of the Company entitled to attend and vote at the meeting convened by this notice you are entitled to appoint another person as your proxy to exercise all or any of your rights to attend and to speak and vote in your place at the meeting. Your proxy need not be a member of the Company.
You may appoint more than one proxy in relation to the meeting convened by this notice provided that each proxy is appointed to exercise the rights attached to a different share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share.
By order of the Board Mrs