Shepherd Neame Ltd Preliminary Results For the 52 weeks ended 29 June 2013
Shepherd Neame Ltd
Preliminary Results
For the 52 weeks ended
29 June 2013
Miles Templeman
Chairman
1
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
Starts September
2013
Mark Rider
Finance and IT Director
6
Performance - Highlights
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)
Operating profit level at £12.7m, interest charges
reflect recent acquisition activity
Operating Costs
2013
£m
2012
£m
Operating Profit 12.7
Operating Margin 9.4% 9.6%
Net Finance Costs (4.7) (4.3)
Interest Cover 2.7 3.0
Before exceptional items
• Operating costs and margin reflects
– An increased mix of Managed House, Off Trade, and Export turnover
– Administration of a major wholesaler and significant inflation on glass recycling
• Interest costs reflect higher net debt from acquisitions
• 2014 will reflect
– Incremental charge for water recovery plant of £0.7m
– Additional spend on advertising of £0.4m
2012/13 was a 52 week year. 2011/12 was a 53 week year
(120.3)
12.7
8
(122.2)
Turnover 134.9 133.0
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
9
Business Reorganisation -
(0.9)
• Total business and Board reorganisation
exceptional estimated £1.7m over 2013
and 2014
- Cash impact £0.5m in 2013 and
£0.7m in 2014
• Annualised benefits in region of £2m,
of which around £1m anticipated
in 2014
)
(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)
• Additional trading week in 2012 led to five interest payments versus
four in 2013. Three due in 2014
• Spend on water plant of £3.1m in 2013 and £0.5m anticipated in 2014.
This attracts 100% capital allowances with cash tax savings in 2014
2012/13 was a 52 week year. 2011/12 was a 53 week year
2.7
10
(6.8)
Financing position and borrowing capacity
• £60m term debt to 2026 fixed
on swap at weighted average
rate 5.94% to end of term
• Medium term debt to 2017 of
£28m remains at floating rate
• Year end headroom of £10m
plus overdraft
11
125.8 123.2
9.81
4.0
(75.8)
Balance Sheet maintains a strong position
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)
• Full year pro-forma excluding impact of acquisitions in the year
– Net debt : EBITDA 3.8 times
• Loan to book value of fixed assets 39% (2012: 38%)12
Jonathan Neame
Chief Executive
13
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
14
Portfolio development: To focus capacity on own
beer and licensed brands where there are growth
opportunities
15
Heritage Mainstream Discovery/Craft
Connoisseur Beers
For Special OccasionsRegular
Beers
Premium, World,
Craft Beers
New product development
16
Classic Collection
Discovery/Craft
Investment in brands
17
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 brewing18
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
19
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
20
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
21
22
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
23
• 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
24
Hotel investment strategy
25
• 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
26
RevPAR £48
RevPAR Growth 11.6%
2013
270
231
Tenanted investment strategy
27
• 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
28
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
reorganisation29
Questions?
30