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2013: A solid performance in difficult market
conditions
Performance to 29 June 2013 highlights include:
• Growth in turnover of 1.4%
– 52 week year against a 53 week comparative
• Operating profit before exceptional items level at £12.7m
• Strong retail like for like sales and average EBITDAR growth per
pub
• Volume growth in core brands
• Business and Board reorganisation leading to a £1.2m exceptional
charge 2
A year of further growth in net asset per share and
dividend
3
• Final dividend per £1 share proposed at 20.15p, resulting in full year
dividend 25.15p (2012: 24.5p) up 2.7%
• Net asset value per £1 share of £9.81 (2012: £9.61) up 2.1%
Business and Board reorganisation
• Beer Business key initiatives
– Phased exit of contract brewing to best utilise plant capacity
– Ten year logistics arrangement entered with Kuehne & Nagel
Drinkflow Logistics
• Reorganise Board around two divisions
– Brewing and Brands
– Retail and Tenanted Pubs
4
Business and Board reorganisation
Executive Board 2014
Jonathan Neame
Chief Executive
Graeme Craig
Brewing &
Brands
Director
January 2014
Nigel Bunting
Retail &
Tenanted
Operations
Director
July 2014
George Barnes
Property &
Services
Director
July 2014
Mark Rider
Finance & IT
Director 5
Brewing &
Brands Division
Retail & Tenanted
Pubs Division
Tom Falcon
Production &
Distribution Director
Leaves December 2013
Bill Brett
Non-Executive
Director
Started September
2013
Performance
Turnover 134.9 133.0
2013
£m
2012
£m
1.4
%
Operating Profit 12.7 12.7 -
Net Finance Costs (4.7) 4.3
Profit before Tax 8.0
Statutory Profit Before Tax
(0.9) 0.6
(8.9)
Tax Rate (%)
7.1 9.1
EPS (pence)
23.8 24.6
(21.6)
Full Year Dividend per £1 share (pence)
48.1 49.8
(0.8)
2012/13 was a 52 week year. 2011/12 was a 53 week year
8.4
( )
Total exceptional Items
24.5
7
25.2
(3.4)
2.7
Before exceptional items
Reconciliation to statutory profit
(4.5)
0.6
Exceptional Items
Property Profits(1.2)
0.6
2013
£m
2012
£m
Number of Pubs Disposed0.3
12
Impairment Charge
6
-
Total Exceptional Items
-
2012/13 was a 52 week year. 2011/12 was a 53 week year
8
Business Reorganisation -
(0.9)
)
(7.7)
Cash flows
EBITDA 19.6 19.8
2013
£m
2012
£m
Cash flow from operations 19.0 19.9
Interest and tax
Dividends and purchase of own shares (3.6)
Disposal proceeds 3.5
Internally Generated Free Cash 11.8 12.1
Core Capex (7.7
Acquisitions (3.6) (15.6)
(3.1)
(10.2)
(2.0)Net cash (outflow) (11.2)
2012/13 was a 52 week year. 2011/12 was a 53 week year
2.7
9
(6.8)
125.8 123.2
9.81
4.0
(75.8)
Balance Sheet
Fixed Assets 202.4 198.6
2013
£m
2012
£m
Other assets and Liabilities 1.8 0.4
Net debt
Shareholders Funds
Net Debt : EBITDA 3.8
Gearing 62% 62%
Net asset per £1 share 9.61
(78.4)
10
Overview
• A satisfactory performance in the face of challenging market
conditions
– Strong like for like retail sales
– Average EBITDAR growth in managed and tenanted
– Volume growth in core brands
• Positive actions taken
– Beer portfolio development
– New export opportunities
– Business reorganisation and agreement with KNDL
– Investment in estate, particularly to drive food and
accommodation sales
– Additional support services for licensees
• Industry Matters
– First Duty cut since 1959
– DBIS consultation on Statutory Code of Practice
12
Portfolio development: To focus capacity on own
beer and licensed brands where there are growth
opportunities
13
Heritage Mainstream Discovery/Craft
Connoisseur Beers
For Special OccasionsRegular
Beers
Premium, World,
Craft Beers
Investment in brands
15
Comedy Duo Armstrong & MillerGround naming rights
Movember Partnership
Soul 2 Soul Watergate
Bay ConcertVarsity Match Twickenham
Serpentine Gallery
Future Contemporaries
Party
Core brand performance: Ahead of the market
Volume Growth
2013
5.7%
2012
2.3%
2011
Volume Growth
2013
20.4%
2012
16.8%
2011
Volume Growth9.4%
2013
(9.1)%
2012
3.9%
2011
2012/13 growth rates on a 52 week comparable basis. 2011/12 was a 53 week year
* Own beer volume adjusted to exclude contract brewing16
1.0%
2.7%
Phased exit of Kingfisher contract mitigated by
new growth opportunities
• Phased exit from contract
brewing Kingfisher lager
– 18.6% of own beer 2013
– Brewing ends December
2014
• We expect discontinued
contract volume will be
covered by new brand and
sales initiatives
• New export agreement into
North America
17
Business reorganisation
• March 2013 - 15 roles in
Beer Business consolidated
• July 2013 - 10 year agreement for
distribution and warehousing services
• Shepherd Neame continue to own site
which becomes key part of KNDL
network
• Increased expansion opportunities
outside heartland
• Transfer of operations in October
2013. Limited redundancies
anticipated
18
Progress against long term pub strategy
Objective Progress
Improve quality and average
earnings of pub and hotel estate
• 26 pubs and hotels acquired, 51
sold since 2008
• Strong average EBITDAR per pub
growth
Build retail mix • Retail turnover 30% higher in 2013
than 2008
Grow accommodation business • 501 letting rooms (2008: 372)
across managed and tenanted
pubs and hotels
• Now 10.1% of retail turnover
Develop food offer • Strong retail food growth
• Now 29.5% of retail turnover
• Tenanted catering development
support
Increase licensee support • 9 new initiatives in 2013
Attract quality operators • Applicants in 2013 double those of
2008
19
20
We own many of the best freehold pubs in Kent,
London and South East.
• Total investment in pubs £9.9m
(2012: £20.6m)
- Acquisitions £3.6m
(2012: £15.4m)
- Maintenance/development
Capex £4.6m (2012: £3.7m)
- Repairs £1.7m (2012: £1.5m)
- Disposals £2.7m (2012: £3.5m)
• Over last 5 years average EBITDAR
per managed pub up 42.9%
• Average EBITDAR per tenanted
pub up 11.1%
Pub performance robust in difficult On Trade
market conditions
21
• UK market On Trade volumes down -4.9% (2012: -3.4%)
-Wet and dull Summer in 2012. Cold Spring in 2013
- Olympics 2012 below expectations
- Consumer caution
• Retail liquor LFL 2.0% (2012: 6.2%)
Food offer development has driven an increase in
customer numbers
Food LFL 5.0%
2013
Ave spend / head £11.23
Spend / head growth -
Managed Houses
22
Hotel investment strategy
23
• Acquisition of Royal Wells Hotel
and Beau Nash for £3.6m
• Redevelopment of Marine Hotel, Tankerton
- £1.4m spend in 2013
• Major bedroom upgrades
- The Royal Hotel, Deal
- The Dog & Bear Hotel, Lenham
- The Sun Inn, Faversham
• 2014 – 15 investment plans
- The Bell Hotel, Sandwich
- The Fayreness, Kingsgate
(to be renamed The Botany Bay Hotel)
- The Royal Wells, Tunbridge Wells
Room refurbishment has supported an increase in
occupancy and RevPAR
Accommodation LFL 7.9%
Occupancy 73%
Occupancy Growth 7%
Managed Houses
• 501 letting rooms at year end:
– Managed Houses
– Tenanted
24
RevPAR £48
RevPAR Growth 11.6%
2013
270
231
Tenanted investment strategy
25
• Total investment in our tenanted estate
£3.1m (2012: £2.6m)
• We provide turnkey service to develop
pub design interiors, provide fixtures &
fittings with pre and post opening
training & support
Supporting our Licensees
• We have evolved our tenanted support with 9 new initiatives and services,
for example
– Catering advisory, menu design
and bespoke coffee supply package
– Enhanced range of national lagers
and guest beers
– New induction programme for
for licensees and online training
• Upward trend in demand for our pubs from high quality applicants
– Lowest number of pubs to let for 5 years
– Double number of applicants compared to 2008
– High licensee satisfaction scores
26
Summary
• Challenging year but creditable performance
• Decisive action to position the business for higher returns
• Current trade strong…..
… but we do not expect it to continue at this rate of growth
through winter
– Managed House LFL for first 10 weeks up 10.2%
– Tenanted LFL EBITDAR up 1.7%
– Total beer volume up 9.3%, own beer volume up 11.9%
• Acquisition of George, Soho
– Leasehold site, minimal earnings impact in 2014, anticipated
capex of £0.3m
• 2014 – year of transition to consolidate business and Board
reorganisation27
Resolution 1
To receive the Annual Report and Accounts
31
No of No of
Shareholders Votes %
For + Discretion 306 42,003,750 99.77
Against 1 79,400 0.19
Other Discretion 12 15,530 0.04
100.00
Withheld 2 220
52.98% of total votes cast by proxy
Resolution 2
To declare a Final Dividend
33
No of No of
Shareholders Votes %
For + Discretion 307 42,003,749 99.77
Against 1 79,400 0.19
Other Discretion 12 15,530 0.04
100.00
Withheld 1 221
52.98% of total votes cast by proxy
Resolution 3
To propose the re-election of Jonathan Neame as
a Director
35
No of No of
Shareholders Votes %
For + Discretion 301 33,594,190 89.12
Against 3 4,085,129 10.84
Other Discretion 12 15,530 0.04
100.00
Withheld 5 4,404,051
47.44% of total votes cast by proxy
Resolution 4
To propose the re-election of James Leigh-Pemberton
as a Director
37
No of No of
Shareholders Votes %
For + Discretion 300 29,936,820 79.42
Against 5 7,742,565 20.54
Other Discretion 12 15,530 0.04
100.00
Withheld 4 4,403,985
47.44% of total votes cast by proxy
Resolution 5
To propose the re-election of George Barnes
as a Director
39
No of No of
Shareholders Votes %
For + Discretion 299 29,931,641 71.11
Against 7 12,145,817 28.85
Other Discretion 12 15,530 0.04
100.00
Withheld 4 5,912
52.98% of total votes cast by proxy
Resolution 6
To propose the election of Bill Brett as a Director
41
No of No of
Shareholders Votes %
For + Discretion 298 29,931,299 71.11
Against 8 12,146,294 28.86
Other Discretion 12 15,530 0.03
100.00
Withheld 4 5,777
52.98% of total votes cast by proxy
Resolution 7
To reappoint the Auditors and to authorise the
Directors to fix their remuneration
43
No of No of
Shareholders Votes %
For + Discretion 302 38,342,873 91.09
Against 5 3,736,991 8.88
Other Discretion 12 15,530 0.03
100.00
Withheld 3 3,506
52.98% of total votes cast by proxy